Photo by Olga DeLawrence on Unsplash

According to the government, the tax could have resulted in a block of 20 percent of all exports of products of specific sectors, but will now not be an issue.

The EU is considering implementing “the Carbon Border Adjustment Mechanism (CBAM)” in the coming years. It is a tax that will be imposed on carbon-intensive products imported to the EU to help with the green energy transition and protect EU manufacturers. Ukraine has a large CO2 footprint in parts of its production, and the government has feared that CBAM would mean a block of 20 percent of products in some sectors. 

Deputy Prime Minister for European and Euro-Atlantic Integration of Ukraine Olha Stefanishyna, however, now says that it will not be the case. 

“According to the estimates by our think tanks, the introduction of such a measure would actually block 20% of all exports of Ukrainian products of certain sectors to the European Union market,” Stefanishyna said, according to Ukrinform

“In fact, as a result of the negotiations (with the EU), we agreed that such a decision would not provide for trade restrictions, would not violate the Association Agreement, and would not produce an immediate impact on the export of Ukrainian products,” the Deputy Prime Minister said, referring to Ukraine’s free trade with the EU. 

What is CBAM?

The GMK Center writes that CBAM could increase the export costs for Ukrainian companies exporting to the EU by 566.3 million euros per annum. The new tax is supposed to be implemented by 2023 at the latest and is a tax imposed on carbon-intensive products exported to the EU to decrease CO2 emissions. 

The tax also ensures that EU producers, going through the costs of a green energy transition, have the same conditions as foreign companies with less strict environmental laws. Critics of the tax say that it is just another way that the EU to tax towards foreign companies and a way for the Union to protect its internal market even more. 

The European Commission expects that the new law will bring revenues of about five to fourteen billion euros. Many Ukrainian industries have a large carbon footprint, and the Ukrainian government, therefore, feared to be heavenly taxed. EU is Ukraine’s largest trading partner, and Ukraine has many carbon-intensive industries. 

Among them are pig iron, steel, pipes, chemical products, fertilizers, plastics, and polymers. Several experts and companies have called on the Ukrainian government to deal with the EU to avoid the tax. That is what Olha Stefanishyna now says has happened, so that Ukraine avoids CBAM and can export more or less similar as before.