1) Implementation of the EU's Carbon Border Adjustment Mechanism (CBAM) could result in annual losses for Ukrainian businesses of up to €396 million by 2026-2030 from reduced exports and carbon costs, decreasing Ukraine's GDP by up to 0.08% per year. 2) Key impacted industries include electricity (up to €122 million annual losses), steel (up to €248 million), chemicals (up to €25 million), and cement (up to €3.5 million). Reduced exports and carbon costs under CBAM could decrease Ukrainian steel exports to the EU by 9% and chemicals by 38% by 2030. 3) While comprising around 16% of Ukrainian exports to the

1. Research of the impact on the economy
of Ukraine from the introduction of
CBAM by the European Union
October 2021

2. Contents
Introduction 03
Impact on electricity sector 05
Impact on steel industry 06
Impact on chemical industry 07
Impact on cement industry 08
Conclusion and policy recommendations 09
Contents

3. 15
12 13 13 11
8
7 7 8
6
0,9
0,6 0,5 1,5
1,8
2016 2017 2018 2019 2020
Power
Iron and steel
Other goods
under CBAM
3
16% of Ukrainian export to the EU is under risk because of CBAM, though
Ukraine is not a subject of the carbon leakage
• Carbon Border Adjustment Mechanism (CBAM) is a
climate measure that should prevent the risk of carbon
leakage and support the EU's increased ambition on climate
mitigation, while ensuring WTO compatibility
• Emissions, covered by CBAM, caused by Ukrainian exports
to the EU in 2016-2020 decreased at a CAGR1 of 7%.
Therefore, Ukraine was not a subject of carbon leakage
-7%
Dynamics of GHG emissions of Ukrainian export goods
production for the EU (goods covered by CBAM), mln t CO2e
• The Ukrainian economy is highly dependent on the EU
market (36%-42% of exports are directed to the EU). The
mechanism affects ~16% of Ukrainian exports to the EU, or
~€3 bln annually
16%
84%
Export under CBAM
Other export
222
91
86
80
37
Power
Cement
Steel
Pig Iron
Ammonia
Fertilizers
Ukrainian export structure to the EU in 2020, $ mln
2,431
2,948
Source: KSE Institute, Ukrstat
1 – Compound Annual Growth Rate

4. 4
CBAM implementation will lead to losses for the Ukrainian business up to
€396 mln annually in 2026-2030 and decrease in GDP by 0.08%/year
219 226 234 241 248
325
115 117 119 121 122
149
25 25 24 23 23
16
2 2 3 3 3
7
361 370 379 388 396
497
2026 2027 2028 2029 2030 2040
Iron and steel
Energy
Fertilizers
Cement
EBITDA loss of Ukrainian exporters due to the
implementation of CBAM, € mln
Up to
-0.06%
Up to
-0.02%
Power
up to -0.031%
Steel
up to -0.042%
Fertilizers
up to -0.004%
Cement
up to -0.0005%
• EBITDA loss is comprised of the following:
– Reduction of export volumes caused by CBAM – up to
€295 mln in 2026-2030
– Impact of CBAM payment itself – up to €101 mln in 2026-
2030
Indirect impact –
-0.02% in 2026-
2030
Direct impact –
-0.05-0.06% in
2026-2030
CBAM impact on the GDP of Ukraine
Source: KSE Institute

5. 5
Impact on electricity sector: Impact of CBAM payment will
amount €115-122 mln per year in 2026-2030
Source: KSE Institute, UN Comtrade, Eurostat
115 117 119 121 122
149
55 57 58 60 61
75
0
10
20
30
40
50
60
70
80
0
20
40
60
80
100
120
140
160
180 EBITDA loss due to СВАМ, € mln
СО2 price in EU, €/t
• The EU electricity market size in 2019 totaled 2,782 TWh, where the
share of imports was 2%. The share of Ukraine in the structure of EU
energy imports was 6.5% - 9.6%
• Since CBAM launch, variable cost of coal generation in Ukraine will
exceed the average electricity price on the nearest export markets
• Therefore, Ukraine will no longer be able to export to the EU coal
generation only, and will export a product mix, where 8% derives from
TPPs, and 92% are nuclear power and renewable energy sources
• It is expected that after integration of the Ukrainian energy system with
ENTSO-E, Ukraine will be able to increase substantially its volume of
electricity exports to the EU market
• Since 2023, expected throughput capacity of the power supply system
will allow export of up to 25 TWh per year, and we expect that
Ukrainian producers will use this opportunity
CBAM impact on electricity sector
2026 2027 2028 2029 2030 2040
35 35 34 33 32
5 5 5 5 5
79 75 73
66 67
96 96 96 96 96
2026 2027 2028 2029 2030
Coal variable cost
CBAM for energy mix
CBAM for coal generation
Export markets price
Comparison of variable costs of power generation and
export prices for electricity, €/MWh

6. 6
Steel industry: EBITDA loss up to €248 mln annually in 2026-2030 due to
CBAM payment (up to €160 mln) and 9% export decrease (up to €89 mln)
Source: KSE Institute, UN Comtrade, Eurofer
145 149 153 156 160
200
74 78 81 85 89
125
219 226 234 241 248
325
55 57 58 60 61
75
0
10
20
30
40
50
60
70
80
0
50
100
150
200
250
300
350
400
450
2026 2027 2028 2029 2030 2040
EBITDA loss due to export decrease, € mln
EBITDA loss due to CBAM payment, € mln
-
СО2 price in EU, €/t
CBAM impact on steel industry
• Domestic steel market of the EU totals 152.2 mln t, 27% is
covered by imports
• CBAM implementation will result in 9% decrease of Ukraine's
metal exports to the EU, which will amount up to 0.6 mln
tonnes in 2030
5 036 5 132 5 230 5 330 5 434
6 593
505 520 535 550 564
718
2026 2027 2028 2029 2030 2040
Export decrease due to CBAM
Export volumes with CBAM
CBAM impact on export volumes of Ukrainian metallurgical
products to the EU, mln t
• In 2030 CBAM for Ukraine will amount 77 €/tonne of steel,
compensated by the increase in EU market prices by 45
€/tonne

7. 7
Chemical industry: EBITDA loss up to €25 mln annually in 2026-2030 due to
CBAM payment (up to €10.5 mln) and 38% export decrease (up to €14.7 mln)
Source: KSE Institute, UN Comtrade, Eurostat
10,4 10,5 10,5 10,5 10,5 8,8
14,7 14,1 13,4 12,8 12,1
7,4
25 25 24 23 23
16
55 57 58 60 61
75
0
10
20
30
40
50
60
70
80
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0
2026 2027 2028 2029 2030 2040
EBITDA loss due to export decrease, € mln
EBITDA loss due to CBAM payment, € mln
-
СО2 price in EU, €/t
CBAM impact on chemical industry
203 193 185 177 170
116
124 117 110 104 97
52
2026 2027 2028 2029 2030 2040
Export decrease due to CBAM
Export volumes with CBAM
CBAM impact on export volumes of Ukrainian chemicals to
the EU, mln t N
• Domestic EU market of fertilizers and chemicals, affected by
the CBAM, totals 24.4 mln t of nitrogen (N), 16% is covered
by imports
• CBAM implementation will result in 38% decrease of
Ukraine's fertilizers and chemicals exports to the EU
• In 2030 CBAM for Ukraine will amount up to 73 €/tonne of
product, with general price increase on the EU market up to
36 €/tonne of product, which will partially compensate CBAM

8. 8
Cement industry: EBITDA loss up to €3.5 mln annually in 2026-2030 due to
CBAM payment (up to €2.7 mln) and 2-5% export decrease (up to €0.8 mln)
Source: KSE Institute, UN Comtrade, Eurostat
1,3
1,8 2,1 2,4 2,7
4,9
0,3
0,5
0,6
0,7
0,8
1,6
1,6
2,3
2,7
3,1
3,5
6,6
55 57 58 60 61
75
0
10
20
30
40
50
60
70
80
0
1
2
3
4
5
6
7
8
2026 2027 2028 2029 2030 2040
EBITDA loss due to export decrease, € mln
EBITDA loss due to CBAM payment, € mln
-
СО2 price in EU, €/t
CBAM impact on cement industry
677 670 667 665 662 643
16 24 26 29 31 51
2026 2027 2028 2029 2030 2040
Export decrease due to CBAM
Export volumes with CBAM
CBAM impact on export volumes of Ukrainian cement to the
EU, mln t
• Domestic cement market of the EU totals 173.1 mln t, 4% is
covered by imports
• CBAM implementation will result in 2-5% decrease of
Ukraine's cement exports to the EU, which will amount up to
31 ths tonnes in 2030
• In 2030 CBAM for Ukraine will amount 13 €/tonne of cement,
compensated by the increase in EU market prices by 10
€/tonne