The Primary Challenge in CBAM Implementation: Uncertainty and Unpredictability

Key Challenges in Implementing CBAM

The biggest obstacles we face in implementing the Carbon Border Adjustment Mechanism (CBAM) are uncertainty, unpredictability, and a lack of data. While we have learned how to complete CBAM reports, the overall level of uncertainty remains extremely high.

In particular, we still lack clarity on:

• Reference values for greenhouse gas emissions in the EU for our specific HS codes, how they will be determined, and how they may change over time.
• Price fluctuations of CBAM certificates and their future dynamics.
• Potential expansion of CBAM to cover additional goods.
• Reactions from major international partners, such as the United States and the United Kingdom, which are already developing their own CBAM equivalents.
• The EU’s phase-out schedule for free carbon credits for our competitors within the EU.

For metal processors like us, the most significant internal risk is the survival of major Ukrainian steel producers after CBAM is fully implemented. Our industry is vertically integrated—from ore mining to finished products, which serve as our raw materials—making us historically dependent on these supply chains.

Carbon Calculations

Our analysis indicates that if CBAM had been fully implemented today, our immediate losses would not be catastrophic. We estimate that approximately 20% of our lowest-margin exports would be affected. However, under normal production conditions (excluding our current focus on fortification products), this impact could increase to 30-40% of our exports.

According to our calculations, our emissions total 1.99 kg of CO₂ per kilogram of finished product (steel fiber). Of this, 1.88 kg CO₂ originates directly from steel manufacturers rather than from our own operations.

Missed Opportunities Due to Uncertainty

The uncertainty surrounding CBAM is not just about risks—it is also limiting our growth and investment opportunities. Over the next five years, Stalkanat has the potential to develop a major new production facility, bringing additional jobs, deeper processing, and enhanced competitiveness.

Instead of exporting steel wire, which falls under CBAM regulations, we could manufacture and export ropes, which have significantly higher added value and are currently exempt from CBAM. This idea was born out of CBAM challenges, but due to uncertainty, it remains just an idea. The lack of clarity on whether CBAM will be extended to rope products prevents us from committing to such a long-term investment.

What Needs to Be Done

We come back to the core issue: uncertainty. No one can guarantee that CBAM will not be expanded to include rope products within five years—or even sooner. That is why we urge policymakers negotiating CBAM with the EU to seek greater clarity and predictability.

Even if Ukraine cannot secure a full exemption from CBAM due to force majeure circumstances, we should at least establish a long-term agreement that provides stability for the next 10-15 years. Specifically, this agreement should:

• Define a fixed and exhaustive list of Ukrainian goods subject to CBAM, preventing future unilateral additions.
• Establish a transparent and predictable calculation methodology, with published values for key components over the next 10-15 years.