Due to the EU’s carbon border adjustment mechanism, the Ukrainian steel industry has already lost between 17% and 93% of its exports in the first quarter of 2026. However, for the European Union, the carbon duty paid by importers for greenhouse gas emissions during production could be a welcome addition to the bloc’s overall budget. At the very least, the European Commission has identified the CBAM as one of its new sources of revenue, funds from which it intends to spend on anything but environmental goals.
Environmental taxes as a source of income for the general budget
There are ongoing discussions in the European Union about ways to increase budget revenues. As reported by Reuters, the bloc seeks to find new resources for 2028–2034 to finance new priorities such as defense and competitiveness. At the same time, the EU is searching for funds to service joint debt.
And although climate is not listed among the priorities, two of the five new revenue streams proposed by the European Commission exist only because of EU climate policy. These are the emissions trading system (EU ETS) and the Carbon Border Adjustment Mechanism (CBAM).
Thus, the proposal is to allocate 30% of the income that national governments receive from the sale of greenhouse gas emission allowances within ETS to the EU budget. The only planned exception is for emissions from construction and transport. Based on a carbon price of €88 per tonne, the European Commission expects to “earn” an additional €9.6 billion each year from emissions.
The EU also wants to collect another €1.4 billion annually into its budget from CBAM. The European Commission proposes directing as much as 75% of this payment to the general EU budget. After expanding the mechanism to new production sectors, the European Union will additionally receive another €200 million a year.
CBAM as a sentence for Ukrainian business
Despite lengthy discussions and arguments presented by the Ukrainian side, the European Union did not make an exception for Ukraine when implementing CBAM. For all logical arguments regarding the conditions of full-scale war and economic instability, Europe referred to its own calculations. However, time has shown that these were absurd.
“Sometimes it's a bit like gaslighting. And it's not that the EU said it was unimportant. They said it wouldn't happen. They have calculations showing there would be no impact. Now we are seeing a really, really significant impact. And this is news to the EU: ‘oh, this is much worse than we expected’. It's highly unusual. Normally, we don't have such discrepancies with the EU in other sectors. And yes, we need to resolve this,” said the Minister of Economy, Environment, and Agriculture, Oleksii Sobolieiv, reported by NV.Business media.
According to the minister, depending on the sector, the Ukrainian steel industry lost 17–93% of its exports in the first quarter. One of the reasons is the inability to verify emissions under wartime conditions.
An analysis published by GMK Center demonstrated that overall metallurgical export losses will reach $1.75 billion. Meanwhile, by 2030, total payments under the EU carbon mechanism will amount to €1.2 billion, which is equivalent to two years’ worth of capital investments in the steel industry.
EcoPolitic previously reported on the steps that the Ministry of Economy intends to implement to postpone the CBAM for Ukraine.
