CBAM’s effects on Ukraine’s economy & its decarbonisation efforts

by Green Deal Ukraina

The European Union’s Carbon Border Adjustment Mechanism (CBAM) will begin its paid phase in early 2026. Using assumptions to reflect the current economic situation of Ukraine in our model, we analyse its effects on Ukraine’s economy and decarbonisation  efforts. Our results suggest that, under its current design, CBAM will lead to output declines of emission-intensive sectors, such as steel and fossil-based power generation. 

However, the mechanism is unlikely to significantly harm Ukraine’s overall economy. Only if the European Union (EU) extends CBAM to include Scope 2 emissions (i.e. indirect emissions from electricity consumption) for key sectors such as aluminium, iron, and steel - a possibility currently reviewed - Ukraine could face more substantial economic disadvantages. Whilst this is a good message for Ukraine’s war-torn economy on the one hand, it also implies that CBAM in its present form is unlikely to drive meaningful decarbonisation in Ukraine. Given that meeting environmental and climate objectives is a core part of the EU accession process, insufficient progress in these areas could hinder Ukraine’s integration into the European Union.