EU introduces “carbon border tax”

As of January 1, the European Union has launched the Carbon Border Adjustment Mechanism (CBAM), a system that places a charge on the carbon footprint of imported goods. From today, importers into the EU are required to purchase certificates priced in line with the cost of CO₂ emissions generated during the production of imported products.

CBAM is an EU levy on imports of carbon-intensive goods such as steel, cement, and electricity. It was introduced under the European Green Deal to encourage EU industry to transition more rapidly to cleaner technologies. The core idea is to level the playing field: EU producers face significant costs to comply with environmental regulations, while imports from countries without similar rules do not. CBAM is intended to prevent EU manufacturers from being undercut by cheaper, high-carbon imports. The mechanism was developed by the European Commission in 2019–2020 and formally adopted in 2022.

In mid-July 2025, Ukraine submitted a request to the European Commission seeking a deferral of CBAM for Ukrainian exporters, along with all the necessary documentation. However, as of January 1, no decision has been taken in Brussels. As a result, from the beginning of the year Ukrainian businesses exporting to the EU are required to pay the “carbon tax.”

CBAM Could Cost Ukraine $3.6 Billion Per Year

According to estimates by the Federation of Employers of Ukraine, Ukrainian exports to the EU covered by CBAM amounted to $3.6 billion in 2023, accounting for 9.9% of the country’s total exports. That year, the EU absorbed 78.3% of Ukraine’s electricity exports, 80.7% of aluminum exports, 82.5% of exports of ferrous metals and metal products, 86.5% of cement and cement clinker exports, and 90.0% of fertilizer exports.

In the first year of CBAM implementation, Ukraine’s GDP could decline by 4.8%, while exports of goods to the EU may fall by 7.8%. At the same time, budget tax revenues are expected to shrink by $2.8 billion per year, and about 73,100 jobs could be lost due to reduced business activity. Under this scenario, total employment losses in 2030–2035 could approach 120,000 jobs, while tax revenues could fall by $3.6 billion.

Beyond the direct risks, businesses also see indirect threats linked to the potential closure of the EU market to importers from third countries. In such a case, these suppliers would seek alternative markets, and one of the possible destinations could be the Ukrainian market.

Tags: EU, environmental policy