17:00 05.06.2024

Ukrainian exporters and the Cabinet of Ministers should accelerate decarbonization in view of the entry into force of the CBAM mechanism in the EU from 2026

6 min read

Ukrainian exporters of products to EU countries and the Ukrainian government should pay more attention to the problem of decarbonization within the Green Deal strategy and, in particular, CBAM - an additional tax for goods with a high level of carbonization during production, which comes into effect from 2026.

This opinion was expressed by experts and representatives of companies during a roundtable discussion held at the press center of the Interfax-Ukraine news agency on Tuesday on “The impact of CBAM on domestic exporters”.

Olga Kulik, Director of the Department of Ecology of Energy and Green Economy of the Federation of Employers of Ukraine, noted that CBAM is very important, it affects exporters, every enterprise.

According to her, during a recent business trip she communicated with representatives of enterprises and structures in Europe, they collect information on CBAM reports. At the same time, if European companies realize the requirement for verification of emission reports, Ukrainian enterprises have problems in this direction, in particular, Ukrainian verifiers must be accredited by the European Commission.

“Verification by data - time is going fast, and we cannot delay these problems. Therefore, the Ministry of Economy together with the Ministry of Ecology will negotiate so that verification will be accredited in the EC. But so far the issue has not been resolved,” Kulik said.

On the other hand, according to her, European countries also have certain problems with the unified standardization of a number of points, with further steps to implement the “green” initiative. It is necessary to create a working group, for work within the framework of which Ukraine should receive an invitation.

In turn, the director of the information and analytical center GMK Center Stanislav Zinchenko stated that by implementing the SWAM mechanism the EU protects its markets. And in the future similar mechanisms will be introduced in other countries, such as the UK, USA, Australia.

“This is a new wave of protectionism, this is ‘green’ protectionism and it will step the planet. It will lead to a reformatting of flows, but it will also help reduce emissions,” Zinchenko predicts, adding that there are currently not enough emission verifiers in the EU, in Ukraine and globally.

“Less than 10% of the 20,000 companies in Germany that were supposed to report on time have done so. And in Ukraine there are also problems with the reports, with the methodology. A very crude procedure, a crude experiment, but it is starting to affect Ukrainian companies. Ukraine does not have a single document on SWAM", - stated the expert.

According to him, due to force majeure circumstances because of the war, Ukraine may not be subject to the requirement to submit verified reports from 2026, but only declarative reports on SWAM, without payment for certificates.

According to him, in case of introduction of strict requirements of the SWAM, Ukraine's losses, if calculated at 2023 prices, may amount to $600 million for pig iron exports (“minus” 1.4 million tons), $640 million for semi-finished products, and $200 million for rolled products. In general, losses at steel enterprises may reach $1.5 billion.

Other industries will also suffer losses.

“We do not see the interest of either the government or the ministries, which should conduct constant negotiations. And the EU is surprised why Ukraine is not actively involved in this process. Unfortunately, part of the government employees believe that this is a problem of business, not the Cabinet,” Zinchenko summarized.

Arzinger partner, head of the Energy and Natural Resources, Environmental Protection and Sustainable Development practice Angelika Livitskaya emphasized that SWAM is a mix of ecology and economics, and Ukraine has an obligation to implement EU legislation in Ukraine.

“We are implementing a number of waste management regulations. And we expect more cooperation from the government and ministries. It is unlikely that we will make it by 2050, but we have a commitment,” Livitskaya said.

According to her, cement, steel, aluminum, and fertilizers will fall mainly under SWAM. And it is necessary to submit reports by May 31 of each year, the first time - by May 31, 2027 with a report for 2026. Failure to submit reports will result in significant fines, from EUR10 to EUR50 for each ton of emissions.

“The government needs to raise the issue of force majeure for Ukrainian enterprises,” Livitskaya believes.

Lyudmyla Kripka, executive director of the Ukrcement association, noted that Ukrainian enterprises have the opportunity to declaratively submit emission reports.

“We initiated such a procedure, we are not obliged to buy SWAM certificates under force majeure circumstances. We offer and ask to work within the framework of SWAM on a declarative principle,” - emphasized Kripka.

The President of Ukrmetallurgprom OP Oleksandr Kalenkov noted that metallurgical enterprises consider SWAM as an irreversible process: “One way or another, it will be implemented and will be worldwide, it will lead to some reformatting of trade all over the world”.

Previously up to a third of steel products went to the EU, the share has now increased due to the blocking of the sea route, and it could increase if the blockade resumes.

“It is important for the government to get involved in the process, to pay more attention to it,” Kalenkov stressed, noting that Euro companies from this eco-initiative receive certain subsidies for their development and modernization.

“It is necessary to level the playing field between Ukrainian and European companies - to apply force majeure conditions for Ukrainian enterprises. It is necessary to approach this issue comprehensively, to take into account the issues of modernization of companies. The Ministry of Industry and Ministry of Economy are involved in this process, but it is important that there is one center that will manage this process, so that a unified position is communicated to European colleagues", - said the head of Ukrmetallurgprom.

He also believes it is necessary to create a competitive market of verifiers in Ukraine so that both local and European companies could work here.

Earlier, the head of international relations of Metinvest Group Andriy Kryl during Ukraine's Future Summit said that soon a new obstacle for Ukrainian companies to work in the European market will be the carbon duty (CBAM), which will work in full in 18 months. The top manager expressed hope that thanks to the dialog between the Ukrainian government and the European Commission these obstacles can be overcome and trade flows will remain uninterrupted.

In turn, Vladyslav Varnavskiy, Director for Ecology and Industrial Safety of Interpipe, at the “Exporters' Summit” organized by Forbes Ukraine, noted that companies should pay more attention to environmental projects within the framework of the EU requirements on the topic of “green” economy - Green Deal and CBAM. And clarified that despite the fact that this topic is becoming increasingly broad and not only political, but also economic and public, in Ukraine so far few companies pay attention to it, even exporters of products to the EU.

As stated on the website of the European Commission, the “green” agreement (Green Deal) is a strategy that should bring the EU economy to a modern, resource-efficient and competitive state through commitments to reduce greenhouse gas emissions by 55% by 2030 and stop completely by 2050.

Source: https://www.youtube.com/live/NLolUEfnqPY