To protect the national industry under the conditions of implementation of the CBAM, measures by the State are necessary
Ukraine is losing the climate trade war, according to the European Business Association ( SER ). To protect the national industry in the context of the introduction of CBAM, appropriate measures on the part of the State are necessary, in particular, the development and implementation of its own mechanism.
According to the EBA, even before the large-scale invasion, the EU identified Ukraine as one of the countries that would be most affected by the implementation of the cross-border carbon adjustment mechanism (CBAM). According to pre-war estimates by Ernst & Young, the mechanism could potentially cost Ukrainian producers $300 million.
The EBA noted that, under current conditions, such a financial burden would be excessive for the national economy, as industries and companies subject to CBAM are already among those most affected by hostilities. Furthermore, due to the blockade of Black Sea ports, Ukrainian companies have limited export options to countries other than the EU. Before the war, 45% of iron and steel exports went to the European Union, and in 2023 it was 85%.
In March 2021, the Cabinet of Ministers created a working group to agree on an approach to applying the carbon border adjustment mechanism to Ukraine for consultations with the European Commission. However, nothing is known to the public about the activities of this group.
At the same time, other EU trading partners are actively negotiating the CBAM, responding quickly to regular changes and updates published by the EC.
The EBA Committee on Industrial Ecology and Sustainable Development suggests that Ukrainian authorities focus on two tasks.
One of them is to achieve the application of CBAM to Ukraine on a declarative basis. The current regulation of the mechanism allows the EU to take into account exceptional and unprovoked events that have caused devastating consequences for the economy and industrial infrastructure of a country that exports goods covered by the mechanism (Article 30(7) of the CBAM Regulation ). The company is convinced that one of the approaches that can be proposed under this provision is to apply a declarative approach to goods imported from Ukraine into the EU and covered by the mechanism.
“In fact, it will be the same approach as for other countries, but without charging for emissions”, notes the EBA.
The second task is to develop and implement a CBAM in Ukraine. Annex III of the relevant regulation defines the list of countries exempt from its operation. Exclusively includes EFTA member states, including Norway, Liechtenstein, Iceland and Switzerland. This made other states that actively trade with the EU think about their national analogue of the CBAM.
“As Ukraine will implement the EU climate acquis, we propose to immediately start work on implementing the CBAM in Ukraine. And, like the EU, this work must be led by the government's financial and economic bloc», highlights the association.
The EBA expects a quick response from the Council of Ministers and that the government takes appropriate measures. It is as much about achieving application of the DCFTA to Ukraine on a declarative basis as it is about developing and implementing its own mechanism.
As the GMK Center previously reported, companies that had difficulties submitting their first report under the cross-border carbon adjustment mechanism due to technical problems with the relevant registration were given a 30-day extension.
