Exemption of electricity exports from EU-CBAM

This Policy Paper examines Ukraine’s alignment with the EU’s Carbon Border Adjustment Mechanism (CBAM) conditions for exempting its electricity exports. Enacted in October 2023, the CBAM mandates importers of specific goods, including electricity, to account and pay for embedded greenhouse gas (GHG) emissions, with full implementation set for 2026. Ukraine faces a series of stringent criteria to qualify for an exemption, which includes harmonizing its electricity market and renewable energy legislation with EU norms, implementing an Emissions Trading System (ETS) with pricing equivalent to the EU-ETS by 2030, and establishing safeguards against indirect electricity imports from non-compliant third countries. Despite the challenges, particularly the introduction of a price-equivalent ETS, the study emphasizes the necessity of Ukraine’s adherence to these conditions, detailing the need for a carbon leakage protection system and the critical importance of meeting the first compliance report by July 1, 2025. Failure to comply risks not only incurring CBAM costs but also jeopardizes Ukraine’s electricity market integration and its broader EU accession goals, underscoring the urgency and significance of Ukraine’s efforts to align with EU standards and regulations.

Rouven Stubbe, Henriette Weser, Pavel Bilek

What is a Policy Paper?

Policy Papers refer to current or possible future policy topics. An in-depth economic analysis of the selected topic is presented, from which policy recommendations and possible actions are derived.