— In Ukraine, CBAM is still perceived as something that will somehow “go away on its own.” But this problem does not seem to be “going away,” and Ukraine has not received any postponements. Why is there such a perception?
— This is a classic story about winter seemingly arriving unexpectedly. In reality, everything was announced in advance — like any consistent policy, CBAM moved openly and step by step.
Back in 2019, the European Union declared its goal of making the continent climate-neutral by 2050 and introduced the European Green Deal — a policy aimed at reducing greenhouse gas emissions by around 90% by 2040 compared to 1990 levels and achieving climate neutrality by 2050. CBAM is the practical implementation of this logic at the border. Europeans directly warned: there would be a carbon border tax, and countries that see the EU as their trading partner would have to pay it.
I had dozens of conversations with business associations. The answer was almost always the same: “Europe will never go for this, it would cut off its own trade flows.” Later, the EU gradually rolled out full explanations of the mechanism. Then they published the regulation itself: a reporting phase — and a paid phase starting from 2027. And still nobody believed it.
Even after the CBAM regulation was adopted and entered into force (this was in 2023), people in Ukraine continued to say: “It will not apply to us, we have a full-scale war, there will be postponements and exemptions.” I was among the few warning that relying on the war to force the European Commission to make an exception for us was naïve — especially since we cannot explain what will change after the postponement period ends after 2030. Exemptions, for anyone who actually read the regulation, directly contradict its logic.
— Explain the idea itself. Enterprises that supply products to Europe and have a carbon footprint must pay for it — how does this work?
— At the first stage, the European Commission identified the sectors to which CBAM applies: metallurgy, aluminium, electricity, fertilizers, hydrogen, and the cement industry. Six categories of goods — this is the first “stack”; the list will later be expanded, and we are already expecting clarifications on this topic. Preliminary discussions concern the potential inclusion of around 180 additional CN codes, particularly in industrial machinery, vehicles and components, metal structures, as well as equipment for construction, energy, and the agricultural sector. According to European Commission estimates, around 94% of the potential expansion would concern industrial supply chain products, while only around 6% would concern consumer goods. So one must always look ahead.
These categories contain specific CN codes. And it is very clearly defined which emissions are taken into account. Emissions are divided into direct (Scope 1) — that is, emissions arising directly within a stationary installation during the production process or fuel combustion — and indirect (Scope 2), related to the consumption of electricity, heat, or steam. At the initial stage of CBAM, indirect emissions are mainly taken into account for cement, fertilizers, and electricity, while for metallurgy, aluminium, and hydrogen the focus is primarily on direct emissions.
A company from a third country exporting products to the EU submits a declaration to the importer containing data on the volume of greenhouse gas emissions associated with the production of each tonne of product. Based on these data, the number of CBAM certificates that the importer must purchase in the EU is calculated. Their value is linked to the average EU ETS allowance price for the previous quarter. In April 2026, the European Commission published an indicative CBAM certificate price for the first quarter of 2026 — around EUR 75 per tonne of CO₂.
At the same time, the actual financial obligation depends not only on the volume of emissions and the price of EU ETS allowances, but also on the gradual phase-out of free allowances for European producers within the EU emissions trading system. That is why CBAM is being introduced gradually: in 2026 importers will effectively pay only a small portion of the full carbon cost, and later this figure will gradually increase in parallel with the reduction of free allocation in the EU. Free allowances for sectors covered by CBAM are to be fully phased out by 2034. In addition, the carbon price already paid in a third country may be taken into account in the calculation if it complies with EU requirements.
The actual financial obligation will arise not in 2026, but already in 2027, since there is a time lag of approximately 9–12 months between product delivery, declaration submission, and the final settlement of CBAM payments. Currently, companies exporting products to the EU are in the transitional phase of CBAM and only carry out reporting. At the same time, the practical mechanisms of the emissions verification system by independent accredited verifiers are still being finalized.
— So the information is being collected and accumulated, and the bill will come later?
— Exactly. But there is an important nuance: the fact that the importer physically pays does not mean that the financial burden falls on them. It falls on the Ukrainian producer, because they simply receive less. The more CBAM certificates the importer must additionally purchase for our products, the less they will pay the Ukrainian producer. That is the logic.
— Before we go further — how scary is this really for the economy? Very different figures are being mentioned.
— First of all, we should stop the panic: CBAM will not kill our economy. The estimates do indeed differ. The Federation of Employers of Ukraine predicts that in 2026 CBAM could cost up to 4.8% of GDP and reduce employment by 120,000 jobs. That sounds frightening.
But the modelling we conducted together with German partners within the Green Deal Ukraina project shows that the real economic effect will be much more modest. Under full implementation, the impact on GDP will be moderate (0.1–0.2 percentage points). Meanwhile, the expected reduction in carbon emissions by 2035 would amount to only 0.3–0.8% compared to the scenario without CBAM — meaning that the climate effectiveness of the mechanism in Ukrainian realities is limited. This, in fact, is our main paradox: without an internal carbon price, CBAM functions not as a decarbonisation instrument, but as a customs levy in favour of EU budgets.
At the sectoral level, the picture is more complicated. By 2035, the main burden will fall on metallurgy (–3% of exports, or –USD 250 million), energy (–9%, or –USD 237 million), and cement (–14%). Meanwhile, services, the agricultural sector, and light industry may even benefit from structural changes. So this is not about collapse, but about redistribution — and that is precisely why the hysteria of “they will destroy us” is just as harmful as indifference.
— And what should we do with this logic? Seek a postponement?
— We lost a lot of time on the negotiation track. The regulation did indeed provide the possibility of postponement, but only through two paths. The first is force majeure for a country facing insurmountable circumstances. To obtain it, one must go through bureaucratic procedures and approval in the European Parliament: neither an individual country nor the European Commission itself can grant it at its own discretion. This path concerns the entire economy. The second path was narrower — it concerned the electricity sector, because the European Commission could not fully calculate the impact of CBAM on Europe’s energy resilience.
My position is this: if Ukraine had not simply asked for a postponement “because we are at war and have no money,” but had instead shown a clear trajectory for increasing the domestic carbon price through 2030, 2040, and 2050, and explained what would change after the postponement period ended, Europe would most likely have accommodated us. But we are where we are: nobody in Ukrainian government offices calculated any carbon price with the possibility of refinancing and reinvestment into decarbonisation. There is no price corridor, no carbon price floor mechanism — nothing. Europe calculated everything for us itself and at the beginning of this year published the conclusion: the impact of CBAM on Ukraine will not be critical — the structure of the economy will change, but “nobody dies.”
— So the legal window for postponement has closed?
— Legally — yes, the window is already closed, the regulation is written very clearly. The train has left. But politically, the issue can and should still be continued.
If we move constructively, the logic is as follows. We create an internal carbon price, the revenues from which accumulate in Ukraine and are reinvested by polluting businesses. It becomes a two-sided coin: on the one hand, we take money from enterprises through a carbon tax, and on the other hand, we return it with a clear fiscal linkage for decarbonisation, thereby lowering their cost of capital.
— So the money is not “distributed to pensioners,” but rigidly tied to industrial modernisation?
— This is exactly where the root of the trust problem lies. Today, the carbon tax is UAH 30 per tonne(0.6 EUR), and only those emitting 500 tonnes of emissions per year pay it. This is negligible: the price of a CBAM certificate in the EU is linked to the price of an EU ETS allowance, and that fluctuates in the range of EUR 30–90 per tonne — meaning our tax is hundreds of times lower. But business never wanted to pay it anyway — and the explanation was always the same: “We will pay, and the money will go to metal-plastic windows in some school.” There was no trust that the funds would return to them for modernisation — and, I suspect, there still is none.
At the same time, everyone — both the European Commission and the IMF — says that the tax must be increased. I am convinced that very soon this will become one of the key conditions for the next macro-financial tranches. Because this tax is structural: it is meant to carry out a transition — just as industrial revolutions once gave us the wheel, the engine, automation. Now there is a transition toward energy-efficient technologies and renewable energy sources: from fossil fuels to cleaner solutions.
— Is the EU’s idea that thanks to this its industry will become more competitive?
— Yes. Any policy has its advantages and limitations, and it is impossible to calculate everything perfectly in the end. But the fact remains: Europe has been very successful in reducing industrial pollution — all their studies confirm this. The price of this was a change in the structure of the economy: part of the heavy industry — top polluters — shut down, part modernised, and part became more energy-efficient.
— And part moved production to third countries?
— Or to China — yes, “carbon leakage” occurred, which the EU is also fighting against. That is why the reverse policy appeared — reshoring, the return of enterprises from China back to the EU. This is an endless process, and the only question here is: what will Ukraine do?
— What?
— For me the answer is obvious: we must move toward the EU. Seventy percent of our trade turnover is with the European Union; it is our main trading partner, which also co-finances a significant part of our budget. This is a geopolitical choice. And Europeans say directly: if you want to become full-fledged members, you must have these policies, because they concern a huge share of both foreign currency revenues and industry.
The argument “we are at war” no longer works. I was present at negotiations where the essence was the following — Ukrainian officials said: “We are at war, we have losses,” and Europeans replied: “We know, that is why we are financing you. Let us talk about reform.” We need to propose to the EU an architecture of carbon taxation — maybe not perfect, not with several carbon pricing instruments as in the United Kingdom and a fully-fledged emissions trading system, but simply better than the current one.
In the United Kingdom, the carbon pricing system is multi-layered: alongside the UK ETS emissions trading system, the Climate Change Levy and Carbon Price Support are also applied — separate mechanisms for taxation of energy and emissions in the electricity sector. Such a model allows the carbon price to be partially stabilised: even if the market price of allowances within the emissions trading system falls, tax mechanisms continue to operate, ensuring a minimum level of carbon pricing and long-term incentives for decarbonisation. Then we would have a subject for conversation about postponement. Right now, essentially, nobody is proposing this.
— Do the United States pay CBAM — considering Trump’s scepticism toward the “green transition”?
Everyone pays CBAM among third countries, without exception. What is more interesting is something else: major economies are themselves thinking about their own “mirror” CBAM. In the United States, Clean Competition Act, even before Trump, a corresponding bill had already been registered. China is introducing its own CBAM, and the United Kingdom has already introduced one — which is not obvious to many people: countries exporting to the EU and paying CBAM there understand that their industries will bear higher costs, and they begin protecting them from dirty dumping by other countries through their own mechanisms.
In other words, CBAM is no longer just a European story. Other major economies will introduce it as well. And Ukraine, once it has its own carbon price, will also have to introduce its own CBAM. We need to protect our own industry in this way, rather than oppose the overall trend.
Although there is a deeper question here: does Ukraine see itself as an industrial country and a trading partner of the EU? Because if not, then indeed we can simply shut everything down. Personally, I do not really understand how a country at war and with such a neighbour can afford deindustrialisation or the loss of its key market (up to 70% of exports) and the geopolitical support that today, together with us, stands against Russia.
— What key elements of this carbon taxation architecture need to be built?
— The starting point is the latest annex to the CBAM regulation, which defines how a carbon price paid in a third country will be taken into account when calculating the payment (carbon price deduction). The CBAM regulation is a model bureaucratic document: it will function exactly as written; it is impossible to circumvent it.
Several hard conclusions follow from it. The only basis for reducing a CBAM payment is a truly paid, “effective” carbon price in the country of production. Whatever amount you paid domestically — that amount reduces your payment. If you paid UAH 30 per tonne — minus exactly UAH 30, not more. Carbon offsets (climate finance) may also be taken into account, but for no more than 10% of total emissions cap, and only if recognised by the European Commission, within the framework of Article 6 of the Paris Agreement and coordinated with the UNFCCC — the UN structure responsible for climate change issues.
The conclusion is simple: the carbon price must be nationwide and fiscal. Voluntary payments do not work. And one major achievement already exists: since 2024, after the adoption of the corresponding law and amendments to the Budget Code, the tax no longer goes into the general state budget fund, but into a separate line item — the State Decarbonisation and Energy Efficiency Transformation Fund. Its operator is the State Agency on Energy Efficiency (through JSC “Decarbonisation Fund of Ukraine”). There are clear allocation criteria, real market mechanisms, possibilities for lowering financing costs and obtaining loans — because the Fund holds a financial services licence and cooperates with banks.
Compared to the past, this is a breakthrough. Previously, the tax was negligible, went “everywhere,” was dispersed, with no fiscal linkage whatsoever — and decarbonisation did not happen. Now the Decarbonisation Fund is operating. I would scale this mechanism up: through amendments to the Budget Code, allow polluters to refinance the taxes they paid into specific decarbonisation projects. In the EU, there is a Modernisation Fund for this purpose — businesses prepare projects (a wind power plant, filters, and so on), and the fund co-finances them.
— So this is not only about “collecting more money,” but about pushing industry toward modernisation?
— Yes. Businesses usually invest in expanding production — in capital that increases output, not reduces emissions. Such externalities are not regulated by the market; that is exactly why separate taxes are introduced to do so. And Europe here is a global pioneer.
— How does the EU maintain competition with China, which is increasing industrial capacity?
— China is difficult to compare with at all — it is in a separate weight category. China is not forced to “put all eggs in one basket”: on the one hand, it is a leader in production localisation and has the ambition to manufacture everything domestically, including for Europe; on the other hand, it does not neglect oil, gas, and coal, because the main goal is to increase volumes at any cost.
But the economy is a system of communicating vessels, and I would not say that China is betting specifically on fossil fuels. On the contrary — it is a leader in the production of electric vehicles, batteries, and solar panels. China understood European green policy very early, localised it, and now uses it against Europe in trade wars. And only recently, around 2022, Europe began reshoring — bringing technological enterprises back. Yes, it is willing to bear transaction costs and higher labour costs in order to maintain balance.
So is there any point in “playing around” with climate policy? This is a long-term game, with a horizon of 25 years — until 2050. I also had a question: would Europe return to purchasing Russian oil and gas after the full-scale invasion — after all, there was an energy crisis, prices rose sharply. But Europe acted in the opposite way: against the weapon of fossil fuels (because Russia tried to build the profitability of both the EU and Ukraine around its own fossil fuels and had successes on two fronts), it used the weapon of climate policy. And in this it is very consistent. The transition away from fossil fuels is not simply a change of energy source, it is a change of approach — and for us, as a country, it is also beneficial.
— There is an impression that “green energy” is not yet replacing fossil fuels as much as simply adding volume — we are just consuming more energy overall?
— There is such a concept as decoupling — separating economic growth from resource consumption. Europe has demonstrated this empirically: their GDP has been consistently growing without the collapses we have seen in Ukraine, while energy consumption and greenhouse gas emissions have not grown synchronously.
The principle is simple: the best energy is the megawatt that was saved. Saved money is earned money. If we save energy and improve technology — that is much better than increasing capacity. Renewable energy sources will never be enough to replace all consumption. Therefore, the work must proceed in two directions: first, energy efficiency — reducing inflated consumption, and then gradually replacing real demand with renewable sources. Simply “burning, burning, burning” is not a solution. Because today economy, energy, technology, and geopolitics are interconnected things.
— Modernising industry and the energy sector is very expensive. Where can Ukraine get financing for this? What mechanisms do we have for access to European funds?
— In financing large energy and industrial projects, there are always two components.
The first is the company’s own contribution. Ukrainian rhetoric was long built around the thesis that “there is state aid in Europe, but not here.” But one could respond: look at how much carbon tax is paid in Europe and how much is paid here. Where should the resources come from in order to provide you with support? The state forms its budget through fiscal mechanisms: the more you pay, the more support you receive. These are interconnected things. In any banking mechanism, you will be asked about your contribution, collateral, and liquidity. Stories where someone comes with European money and builds us a factory “turnkey” simply do not exist — this should be forgotten immediately.
The second component is the time lag. Funds are accumulated and financing costs are reduced gradually. One must find a balance here and understand the main point: nobody in Europe demands that we pay EUR 60 per tonne tomorrow. But we are thinking not about tomorrow, but about a horizon of 10–15 years — and almost nobody thinks this way, and that is the problem. If we thought in terms of the investment cycles of metallurgy (15–20 years), some of our funds could long ago have become part of the Modernisation Fund.
Today Ukraine cooperates with the European Investment Bank, World Bank structures (this is mainly direct budget support and IFC support for business), as well as smaller funds — Norwegian, Swedish (for example, Swedfund, which works with both the public and private sectors). We are partially integrated into European funds, but as a third country we are not part of the key ones — the Modernisation Fund and the Innovation Fund, which are financed precisely through European carbon taxes. The EU created the Modernisation Fund to help transition economies — as it once did for Poland and the Czech Republic.
— Are there estimates of how much we could accumulate? There is an idea to transform part of the excise tax into climate finance.
— Part of the excise tax can indeed be transformed into climate finance — but we will still have to raise the carbon price, and it is important to calculate it in perspective. Then we could come to Europeans and say: we pay this amount, can you multiply every euro we pay — for example, add two euros for every one of ours? The logic exists here: excise taxes concern the combustion of fossil fuels, so the linkage is economically justified, and moreover, as I understand from the latest CBAM updates, the EU will take this into account.
But immediately the same issue of trust arises: business will say, “we will pay more, but where is the guarantee that the money will not disappear and that we will not later have to prove our case before law enforcement agencies?” If distribution were handled by the Decarbonisation Fund under the constant supervision of the Accounting Chamber and law enforcement bodies, there would be more trust: this would be a real, fiscal, mandatory payment for everyone that would be recognised in the EU.
— What first-priority steps need to be taken already this year in order to move with CBAM rather than break against it?
— I will say immediately: the emissions trading system — ETS — which is discussed as an “adequate response” to CBAM, will not save us. Under the EU Association Agreement, it should have been created back in 2017 — and it was not. This is not a quick process: emissions from every installation must be calculated and an exchange platform must be built. Even if we create an ETS in 2028–2030, it will not arrive in time for the payments that businesses will have to make already in 2027.
The realistic plan for this year, as I see it, is the following.
First: a Cabinet of Ministers resolution stipulating that the carbon tax paid by top polluters exporting to the EU is accumulated in a special fund of the Decarbonisation Fund. The resolution should describe the creation of special accounts — perhaps for each enterprise or for each sector.
Second: amendments to the Budget Code that clearly define which measures these funds may be reinvested into, that is, securing a fiscal linkage. The list of measures should be drafted together with the Modernisation Fund (EIB) — with those who already have experience in such allocation.
Third: a clear calculation of how much and over what timeframe the tax can be increased. Today it is UAH 30; let tomorrow it be EUR 1 — this is an increase, but not a fatal one. With this calculation we go to the Europeans.
Fourth: amendments to the Tax Code and the search for additional financing sources. And all this must necessarily be coordinated with Europeans so that double taxation does not arise — when business pays here, but in the EU this is not recognised.
The ultimate goal is for an analogue of the Modernisation Fund to emerge in Ukraine, whose funds are multiplied from the EU side, and for us to gain more active access to them — so that both during and after the war we have an accumulated resource. I do not see any other way out. In essence, Europeans are saying: do not pay CBAM to us — pay yourselves. Simply pay the equivalent. Discussions can also be held regarding equivalence, regarding GDP per capita, but such a discussion has not yet begun.
— Who should do this — the Ministry of Energy?
— I think this is a Cabinet-level issue, where there are two main actors: the Ministry of Economy (which has the mandate to prepare the framework for climate finance and ETS) and the Ministry of Finance — because without the Ministry of Finance nothing will work. Plus the European integration track. As well as the State Agency on Energy Efficiency and JSC “Decarbonisation Fund.” The algorithm is simple: an instruction to create a working group → draft resolution → adoption by the Cabinet → then moving through timelines. It sounds “impossible,” but there is experience: when such an experimental resolution for the Decarbonisation Fund (even without working group) was first prepared, it was adopted within four to six months. When it is truly necessary — everything is adopted quickly.
— To summarise: joining European funds is necessary, but first we need to build our own tax architecture and show our own contribution to Europeans in order to have arguments in favour of participation?
Exactly. First an internal carbon price with a clear fiscal linkage and our own contribution, and only then access to European financing. In the reverse order, it will not work. And this is not a demand from “enemies of Ukraine.” The great goal of accession to the EU, as our geopolitical partner, in order to eliminate Russian influence, consists of specific criteria — and CBAM is one of them.
