Implementation of the European Border Carbon Regulation Mechanism Will Lead to Significant Losses for the Ukrainian Economy

The implementation of the European Border Carbon Adjustment Mechanism (CBAM) could result in significant losses for the Ukrainian economy. According to forecasts from the information and analytical center GMK Center, by 2030, the decline in gross domestic product (GDP) solely due to a reduction in iron and steel exports, considering supply chains, could reach 2.1%.

Anatoliy Amelin, one of the authors of the study, noted that the situation appears quite grim. The GMK Center's forecast sharply contrasts with the European Commission's assessment, which anticipates that the negative consequences for Ukraine will amount to a GDP reduction of only 0.01%. This indicates serious discrepancies in the evaluations of CBAM's impact on Ukraine's economy.

The GMK Center's study indicates that the situation will become particularly critical in 2029-2030, when the tariff burden will increase from 12% in 2026 to 26% in 2030. This will lead to a complete halt in the export of long products and square billets from Ukraine, as well as a 75% reduction in pig iron exports and a 30% decrease in flat product exports. Consequently, three blast furnaces at two major enterprises engaged in long product manufacturing may cease operations. Overall export losses are estimated at $1.75 billion by 2030.

The authors of the study also emphasize the discriminatory nature of CBAM for countries with lower income levels, which cannot provide state subsidies for large-scale decarbonization of metallurgical production. This further undermines the investment capacity of Ukrainian metallurgical enterprises, which are already suffering from a shortage of investment resources.

Aggregate payments for CBAM for Ukrainian metallurgical product exports in 2026-2030 could reach €1.2 billion, equivalent to the capital investments of Ukrainian metal plants over two years. In comparison, only $650 million was invested in 2024.

“In addition to direct economic losses, CBAM threatens to disrupt established cooperation in supply chains between Ukrainian and European businesses. The integrated operation of the Ukrainian plant Kametstal and the Bulgarian Promet Steel is a striking example of such risk: the Ukrainian enterprise supplied billets for rebar production in Bulgaria, jeopardizing jobs in the EU,” the study's conclusions state.

According to GMK Center estimates, the Ukrainian economy will be unable to compensate for losses from CBAM, which could reach $2 billion in annual exports, $0.9 billion in capital investments, and $1.6 billion in tax revenues per year. This is explained by the lack of business models of such scale in the country.

GDP losses could exceed the projected 2.1% by 2030, depending on changes in the structure of the post-war economy. Currently, Ukraine's GDP is supported by military expenditures financed by international partners, with defense spending accounting for over 43% of GDP. Any reduction in such expenditures could lead to economic contraction, making the $6 billion losses associated with CBAM a critical additional burden on the economy.

GMK Center emphasized that preserving Ukraine's mining and metallurgical complex requires a reassessment by the European Commission of Ukraine's losses from CBAM. This is necessary to restore dialogue regarding the postponement of obligations for Ukraine and to discuss new mechanisms for financing decarbonization projects involving the EU. This would ensure the survival of the sector and maintain its strategic value for European supply chains.

The full version of the study can be accessed via the link. As previously reported, the CEO of ArcelorMittal Kryvyi Rih, Mauro Longobardo, stated that the introduction of CBAM has already led to a complete cessation of the company's metal product exports to the EU market. According to him, the company's clients in the EU canceled all orders for the first quarter of 2026 upon learning of the need to pay an additional CBAM fee ranging from $60 to $90 per ton of product.