Ukraine must defend its right not to pay carbon tax on exports to the EU

23/ 09/ 2020

Ukrainian businesses will be able to continue to trade freely with the EU if the Government manages to synchronize environmental and economic policies with the new climate ambitions of the European Union. This position was developed by the participants of the EU-Ukraine Round Table on the introduction of the Carbon Border Adjustment Mechanism (CBAM) in the EU, which took place on September 17 on the platform of the EBA Committee of Industrial Ecology and Sustainable Development. The European Union is Ukraines main trading partner. During the 2015-2019, the EUs share in Ukrainian exports increased from 34.1% to 41.5%. Therefore, Ukrainian products are obviously negatively affected by the introduction of CBAM. According to the EBA experts, the additional financial burden on companies exporting to the EU may increase by 566.3 million euros per year. Almost 94% of this amount will have to be paid from goods and services to enterprises of the metallurgical industry and electricity, which will make domestic products uncompetitive in the EU market, as well as hit the pocket of the final consumer. In 2014, Ukraine, as a party to the EU in the Association Agreement, has undertaken to harmonize existing legislation with European norms and requirements, including the field of environmental protection and combating climate change. In early 2020, Ukraine announced its intention to join the EGD and sent a position paper to the European Commission. At the same time, Ukraine, according to the IMF, remains a country with an underdeveloped economy. Consequently, the introduction of additional economic barriers could potentially harm the sustainable development of the country as a whole. Thus, we once again insist on the expediency of initiating a dialogue with the EU on the development of a differentiated approach to the implementation of the CBAM to goods exported from Ukraine to EU countries. At the same time, Ukraine should be considered as a direct participant in the EU internal market, meaning that the application of these requirements should be carried out at the external borders of Ukraine. To this end, it is critical to demonstrate real steps in the development of environmental policy and the transformation of the Ukrainian industry, agriculture, energy, housing and communal services, and transport. We are talking about setting realistic goals for reducing greenhouse gas emissions in the second nationally determined contribution of Ukraine to the Paris Agreement, creating conditions for the earliest possible launch of a scheme for greenhouse gas emission allowance trading, reforming environmental finances, and their intended use. Deepening of European integration processes, the continuation of decarbonization of the economy - these are the main criteria for the successful development of Ukraine in the coming years. EBA would like to thank all participants of the event and hopes for further productive cooperation in the field of sustainable development. Reference: the event was organized by the European Roundtable on Climate Change and Sustainable Transition (ERCST) in partnership with the European Business Association. Representatives of the European expert community joined the discussion: Andriy Marku, ERCST Executive Director, Michael Meling, Deputy Director of the Centre for Energy and Environmental Policy Research at the Massachusetts Institute of Technology (CEEPR MIT), Aaron Cosby, economist and sustainable development expert, Henning Hader, ERCST Senior Adviser, The European Association of Electricity Producers Eurelectric and George Zakhman, a representative of the Bruegel Expertise Centre. The Ukrainian side was represented by Iryna Stavchuk, Deputy Minister of Environment and Natural Resources for European Integration, Taras Kachka, Deputy Minister of Economic Development, Trade and Agriculture - Trade Representative of Ukraine, Roman Andarak, Deputy Representative of Ukraine to the EU, Vitaliy Kushnirov, General Director of the Strategic Directorate Planning and European Integration of the Ministry of Energy of Ukraine, and Stanislav Zinchenko, Chairman of the EBA Committee for Industrial Ecology and Sustainable Development. Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

The European Union is Ukraine’s main trading partner. During the 2015-2019, the EU’s share in Ukrainian exports increased from 34.1% to 41.5%. Therefore, Ukrainian products are obviously negatively affected by the introduction of CBAM. According to the EBA experts, the additional financial burden on companies exporting to the EU may increase by 566.3 million euros per year. Almost 94% of this amount will have to be paid from goods and services to enterprises of the metallurgical industry and electricity, which will make domestic products uncompetitive in the EU market, as well as hit the pocket of the final consumer.

In 2014, Ukraine, as a party to the EU in the Association Agreement, has undertaken to harmonize existing legislation with European norms and requirements, including the field of environmental protection and combating climate change. In early 2020, Ukraine announced its intention to join the EGD and sent a position paper to the European Commission. At the same time, Ukraine, according to the IMF, remains a country with an underdeveloped economy. Consequently, the introduction of additional economic barriers could potentially harm the sustainable development of the country as a whole.

Thus, we once again insist on the expediency of initiating a dialogue with the EU on the development of a differentiated approach to the implementation of the CBAM to goods exported from Ukraine to EU countries. At the same time, Ukraine should be considered as a direct participant in the EU internal market, meaning that the application of these requirements should be carried out at the external borders of Ukraine. To this end, it is critical to demonstrate real steps in the development of environmental policy and the transformation of the Ukrainian industry, agriculture, energy, housing and communal services, and transport. We are talking about setting realistic goals for reducing greenhouse gas emissions in the second nationally determined contribution of Ukraine to the Paris Agreement, creating conditions for the earliest possible launch of a scheme for greenhouse gas emission allowance trading, reforming environmental finances, and their intended use. Deepening of European integration processes, the continuation of decarbonization of the economy – these are the main criteria for the successful development of Ukraine in the coming years.

EBA would like to thank all participants of the event and hopes for further productive cooperation in the field of sustainable development.

Reference: the event was organized by the European Roundtable on Climate Change and Sustainable Transition (ERCST) in partnership with the European Business Association. Representatives of the European expert community joined the discussion: Andriy Marku, ERCST Executive Director, Michael Meling, Deputy Director of the Centre for Energy and Environmental Policy Research at the Massachusetts Institute of Technology (CEEPR MIT), Aaron Cosby, economist and sustainable development expert, Henning Hader, ERCST Senior Adviser, The European Association of Electricity Producers Eurelectric and George Zakhman, a representative of the Bruegel Expertise Centre.

The Ukrainian side was represented by Iryna Stavchuk, Deputy Minister of Environment and Natural Resources for European Integration, Taras Kachka, Deputy Minister of Economic Development, Trade and Agriculture – Trade Representative of Ukraine, Roman Andarak, Deputy Representative of Ukraine to the EU, Vitaliy Kushnirov, General Director of the Strategic Directorate Planning and European Integration of the Ministry of Energy of Ukraine, and Stanislav Zinchenko, Chairman of the EBA Committee for Industrial Ecology and Sustainable Development.

Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.