A Ukrainian proposal would redirect part of the carbon cost associated with exports to the European Union into the domestic budget, subject to EU recognition under the Carbon Border Adjustment Mechanism (CBAM).
The concept was presented by Serhii Shemlii, a regulatory manager at JSC Market Operator, during an Energy Club discussion on September 29. The proposal concerns goods exported to the EU that fall within the CBAM framework and would link the domestic contribution to the European carbon price, taking into account qualifying carbon payments already made in Ukraine.
The proposal remains under discussion and has not been adopted as a government measure.
Proposed treatment would differ by destination
Under Shemlii’s concept, the proposed contribution would apply to EU-bound CBAM-covered goods, while exports to other destinations would continue to operate under existing domestic pricing arrangements.
The approach is intended to determine the portion of the carbon cost that could be collected in Ukraine rather than paid entirely through the EU border mechanism, but any such treatment would depend on whether the European Union recognises the Ukrainian payment for CBAM purposes.
EU rules allow reductions in the carbon cost payable at the border when an eligible carbon price has already been paid in the country of production. The extent of any reduction depends on the carbon price concerned, the emissions covered and evidence demonstrating that the payment was effectively made.
A domestic charge described as climate-related would not, by itself, establish eligibility for a corresponding CBAM deduction.
Exporter margins would not automatically improve
Shemlii also warned that redirecting part of the carbon payment to Ukraine would not necessarily increase the margin available to exporters.
The economic outcome could instead depend on negotiations between exporters and European buyers. A buyer could absorb the additional border-related cost, or could seek a lower purchase price from the Ukrainian supplier.
Under that scenario, collecting a comparable carbon amount in Ukraine would primarily determine where the revenue is received, rather than materially reducing the overall carbon burden associated with the transaction.
This makes revenue retention the principal fiscal rationale for the proposal, while its direct benefit to exporters would depend on the final structure of the measure and the ability of producers to pass carbon-related costs through to customers.
Electricity excluded from the initial estimates
Shemlii did not include electricity in estimates based on 2025 customs data.
The treatment reflects a distinction between electricity exported directly as a commodity and electricity consumed during the production of other goods. The proposal does not apply a single emissions calculation to both categories.
The distinction is relevant to the design of any Ukrainian carbon-payment mechanism intended to interact with CBAM, particularly where emissions associated with electricity consumption form part of the carbon footprint of exported industrial products.
EU recognition remains a key condition
For Ukraine, the central regulatory constraint is whether a domestic carbon payment would qualify for recognition under EU CBAM rules.
If Ukraine introduced a payment before its treatment under the EU system was established, exporters could face an additional financing burden without receiving the anticipated reduction in their CBAM liability.
If the payment were recognised by the EU, however, part of the carbon-related revenue could remain in the Ukrainian budget while the overall carbon cost borne across the transaction remained broadly unchanged.
The proposal therefore places the fiscal objective of retaining carbon-related revenue in Ukraine alongside the separate question of how the payment would affect the cost position of Ukrainian exporters in the EU market.
