EU Carbon Tariff Hits Ukraine: Steel Industry and GDP Face Major Losses

How the CBAM Mechanism Is Reshaping Ukraine’s Economy

According to Главком: Starting January 1, 2026, the European Union is enforcing its Carbon Border Adjustment Mechanism (CBAM), a move that presents a significant economic hurdle for Ukraine. Estimates suggest this policy could slash Ukraine’s gross domestic product (GDP) by 4.8% to 6.3%. Annual export losses tied to the mechanism are projected to range from $1.4 billion to over $3.6 billion. Meanwhile, the EU’s share of Ukrainian goods subject to CBAM has jumped from 41% in 2021 to 68% in 2025, highlighting the growing dependence on the European market.

The National Association of the Mining Industry of Ukraine (NADPU) has voiced strong concerns, stating that

“the carbon border adjustment mechanism (CBAM)... increasingly looks like a serious economic barrier for Ukraine.”

The association further noted that CBAM

“effectively creates unequal competitive conditions,”

which could halt exports of certain Ukrainian steel products to the EU entirely.

Ukrainian Steelmakers Under Pressure

Key details reveal that Ukrainian steel producers are already paying between €74 and €76 per ton of CO₂ emissions. The new mechanism adds an extra $60 to $100 per ton to steel production costs. This erodes the competitiveness of domestic manufacturers, especially amid the ongoing war, which has already strained the sector.

Against this backdrop, NADPU emphasized that

“all this is happening against the already difficult situation in the industry... This is no longer just an economic issue but a factor of social stability and defense capability.”

Compounding the challenges, production has been halted at one of the key facilities of ArcelorMittal Kryvyi Rih, underscoring the severity of the crisis. The highest risks linked to CBAM are expected to hit in 2029–2030, when free emission allowances in the EU will be phased out. Before the war, Ukraine’s mining and metallurgy sector contributed over 10% of the country’s GDP and a third of its exports. Now, its future hangs in the balance due to these new economic pressures.

The EU’s implementation of CBAM introduces fresh obstacles for Ukrainian enterprises, particularly in the context of war and pre-existing economic struggles. Reduced export volumes and rising production costs could have severe repercussions for Ukraine’s economy, especially in the critically important mining and metallurgy sector. Adapting to these new conditions will require Ukrainian producers to embrace innovative strategies and potentially overhaul their manufacturing processes.

The implications of the EU's carbon pricing policy extend beyond immediate economic losses, as highlighted by the recent report on halted metal exports from Ukraine. This situation has resulted in a staggering $1.75 billion loss and threatens thousands of jobs in the sector. For a more comprehensive understanding of how these developments are impacting Ukraine's economy and workforce, read about the halted metal exports and job losses.