15.08.2026
Since the beginning of 2026, CBAM has moved from its transitional phase into full application, including for electricity imports into the EU. For Ukraine, this is no longer a distant prospect but a new factor that directly affects the economics of cross-border trade.
For the Ukrainian market, this means reassessing export competitiveness from scratch: factoring the carbon component into pricing, determining who will bear CBAM-related costs and how they will be split between the seller and the European importer, and, most importantly, how the actual carbon profile of the electricity will be verified. This issue is especially acute for Ukraine, where a significant share of generation comes from nuclear, hydro, and renewable sources.
At the same time, full integration of the Ukrainian market with the European one is not just a matter of physical flows. It concerns trading rules, Market Coupling, balancing, access to cross-border interconnections, and the compatibility of regulatory mechanisms.
How electricity trade between Ukraine and the EU actually works today, what CBAM changes for traders, why verifying the actual carbon intensity may become a key factor in preserving exports, and what risks should already be factored into contracts — Roman Sutchenko, founder of LLC “Kilowat-Market,” discussed these questions in an interview with Energy Club journalist Olena Karpachova.
— Mr. Sutchenko, how would you assess the current state of electricity trade between Ukraine and EU countries?
— If we assess the state of trade from the beginning of 2026 to today — in August — I would describe it as “a dynamic arbitrage repeatedly tested by shocks.”
On one hand, we have a solid technical foundation. The maximum allowed import capacity from the EU today is 2.1 GW (plus 250 MW in emergency assistance mode), while commercial exports are capped by European TSOs at 650 MW (for the Ukraine and Moldova directions combined). From January to August 2026, these capacities were used to the fullest: Ukraine actively brought in imported kilowatts during periods of high consumption and tried to export during surplus hours whenever the price spread allowed.
But this year has vividly demonstrated just how vulnerable and inflexible our market still is. Take the situation with cross-border networks: throughout April and May 2026, the interconnection with Slovakia was almost entirely closed due to large-scale technical and maintenance works on the infrastructure.
What happened in practice? A major trading corridor was out for two months. All commercial flows and borrowed capacity instantly redistributed to the interconnections with Hungary, Romania, and Poland. This triggered abnormal price spikes at capacity allocation auctions, overloaded neighboring directions, and showed just how sensitive our market is to any physical outage.
This perfectly illustrates the core problem: we still trade in a semi-manual mode through isolated auctions rather than through a shared automatic algorithm, as would exist under Market Coupling. And when the full CBAM financial regime took effect on top of this vulnerability on January 1 of this year, every exported megawatt came under threat of tax pressure. The physical cross-border flow exists, but the market model behind it remains far too fragile.
— How ready is the Ukrainian market today for more active integration with the European electricity market?
— If we’re talking about infrastructure and the qualifications of our traders — readiness is high. In recent years, Ukrainian companies have learned to operate under extreme conditions, mastered working with European platforms like JAO, and gotten to grips with the specifics of neighboring trading zones.
However, regulatory and institutional readiness is significantly lagging behind. The main unresolved gap, as I mentioned above, is the absence of Market Coupling (the integration of the SDAC day-ahead market and the SIDC intraday market under EU Regulation 2015/1222 CACM). Until we merge our exchange systems with the European ones, we remain an “external island.”
In addition, we have serious regulatory discrepancies:
Price caps: these distort price signals. While EU prices can spike or even go negative, our market is confined within artificial limits, which makes automatic arbitrage impossible.
Balancing and imbalance-responsibility rules: our imbalance market is still too volatile and predictably risky for classic European players.
Implementation of the REMIT regulation: we have adopted Law of Ukraine No. 3141-IX, but actual monitoring and mapping of trading operations to European standards is still being fine-tuned.
Without resolving these key issues, talking about full integration is like trying to run a high-speed train on outdated tracks.
— What significance does the Slovak direction of electricity trade have for Ukrainian traders?
— Slovakia (the Ukrenergo–SEPS interconnection) is one of four equally important corridors, alongside Hungary, Romania, and Poland. Moreover, in terms of raw volumes, Hungary traditionally takes the largest share of commercial flow — up to 40–50% — while Slovakia accounts for around 23% of the import-export balance.
— What is the real, rather than exaggerated, value of the Slovak direction for a trader?
— Transit function: Slovakia matters not so much as an end consumer but as a “technical junction.” It provides the shortest route to the liquid markets of the Czech Republic, Austria, and Germany through OKTE’s exchange instruments.
Margin arbitrage: during periods when auction spreads at the Hungarian or Romanian border are squeezed out by intense competition, the Slovak interconnection allows for risk diversification and finding a margin.
But this direction also has serious drawbacks. Physically, it’s tied to a limited number of infrastructure facilities. When the line went for scheduled maintenance in April–May of this year, the Slovak market simply switched off for us for two months, and traders redirected capacity through Romania and Hungary without any real problems.
So for a Ukrainian trader, Slovakia isn’t some “unique holy grail” — it’s simply a good, working, pragmatic tool within the broader portfolio. Diversification across all four neighboring EU countries is the real basis of our resilience.
— How might CBAM affect the economics of Ukrainian electricity exports to the EU?
— CBAM changes the entire fundamental economics of exports. We have to forget the times when assessing whether a deal made sense came down to a simple formula: EU Price − Ukrainian Price − Crossing Cost = Profit.
Now a heavy financial block wedges its way into this formula — the cost of the carbon factor (EU Regulation 2023/956).
Every megawatt-hour that crosses the EU border now carries a “carbon price tag.” If you can’t provide certified proof that your electricity was produced with zero emissions, the EU automatically treats it as “dirty.” Economically, this means the EU importer is obligated to purchase and declare CBAM certificates.
A simple calculation: if Ukraine exports, say, 80,000–100,000 MWh in a peak month, then applying the default factor, the total CBAM payment for buyers would reach €3.5–4.5 million in a single month! That adds €30 to €45 in extra costs to every megawatt of Ukrainian electricity. Given that the average spread between the Ukrainian day-ahead market and European marketplaces is €10–20, CBAM makes classic export not just unprofitable, but deeply loss-making.
— What risks might arise for the margins, pricing, contracts, and competitiveness of Ukrainian traders?
— Let’s break these risks down point by point:
Margin destruction. Under the current 2026 rules, the price of a CBAM certificate is tied to the quarterly average price of EU ETS auctions and stands at around €75 per tonne of CO2 (for example, it was €75.36 in the first quarter and €75.28 in the second; I should note that starting in 2027 this calculation will switch to a weekly basis). If the default factor (Default Value) is applied to Ukrainian electricity — which, due to the presence of coal-fired units in our power system, works out to roughly 0.5–0.6 t CO2/MWh (per the methodology in Annex IV of EU Regulation 2023/956) — this translates into an automatic tax of €35–45 per MWh. Compare that to the CO2 tax in Ukraine, which is only UAH 30 per tonne (Article 243 of the Tax Code of Ukraine). The trader’s margin is simply wiped out.
Price discount. A European buyer, aware of their future obligations to EU tax authorities, will price this risk into the purchase price. They will demand a discount from the Ukrainian exporter equal to the full cost of the CBAM certificates.
Contractual deadlock. Most standard EFET (European Federation of Energy Traders) contracts weren’t designed for this kind of burden. Disputes are emerging: who bears the risk if a verifier doesn’t confirm the emissions report? If a trader can’t provide guarantees of “cleanliness,” European counterparties will terminate deals.
Loss of competitiveness. Our kilowatts will lose out to intra-European sources — for example, Czech nuclear or Polish wind generation, which trade within the EU customs perimeter without any additional duties or complex reporting.
— How important is the issue of verifying the actual carbon intensity of Ukrainian electricity?
— It’s a critical factor. It’s the dividing line between the ability to export and a complete halt to trade.
Verifying actual carbon intensity allows us to replace the absolute evil — the country’s default indicator — with the real figures of a specific generator (Art. 3 and Annex IV of Regulation 2023/956).
If you export electricity from the Khmelnytskyi NPP or the Dnipro HPP, its actual carbon intensity in terms of direct emissions (Scope 1) equals 0 grams of CO2 per kWh. If you can prove this under EU procedures, the cost of the CBAM certificate for your importer will equal €0.
In other words, the ability to verify actual data is the only way to preserve the economics of export and turn our low-carbon generation from a liability into a competitive premium.
— What could happen if standard or default indicators are applied to Ukrainian exports instead of real data on the origin of the electricity?
— If we fall back on “default values,” a classic “carbon trap” will result.
Under EU rules, default values for electricity from third countries are calculated based on the weighted average emissions factor over recent years, or on the dirtiest generation sources in the exporting country. Since coal-fired thermal power plants and gas generation have historically been part of the Ukrainian system, our default coefficient is artificially high.
What does this mean in practice?
Your solar or nuclear plant, which hasn’t emitted a single gram of CO2, will be processed by the EU customs system as if it were produced from the dirtiest coal. You’ll pay the maximum possible tax, and European consumers will get the signal that Ukrainian energy is “environmentally dirty.” This will lead to Ukraine being physically squeezed out of the European energy market.
— Ukraine has a significant share of nuclear, hydro, and renewable generation. In your opinion, how should this be taken into account in the context of CBAM?
— This is the main paradox and the main headache of the moment. We have one of the greenest energy mixes in Europe — up to 80% of our electricity produces no CO2 emissions during certain periods (data from the Ministry of Energy of Ukraine).
However, the European Commission doesn’t look at a country’s overall statistics — it looks at the letter of Regulation 2023/956. And that says: electricity in the general grid is considered “mixed” (grid average) unless you prove otherwise under the strict criteria of Annex IV.
Our low-carbon generation should be taken into account through recognition of a direct physical and legal link between a “clean” producer in Ukraine and a consumer in the EU. The EU should recognize that Ukraine’s NPPs and RES shouldn’t be penalized for the presence of balancing gas or coal capacities elsewhere in the system. But this requires a legal “decoupling” procedure for clean flows, which Ukraine is trying to establish in negotiations with Brussels.
— What mechanisms for confirming the origin and carbon profile of electricity might be needed?
— We need an unbroken chain of evidence consisting of four elements:
If even one link in this chain is missing, the European customs officer or environmental inspector reverts you to the default (most expensive) tariff.
— What practical issues should Ukrainian companies planning to trade electricity with the EU already be taking into account? This concerns licensing, contracts, balancing, nominations, working with European counterparties, financial guarantees, and regulatory requirements.
— Traders now need to overhaul their operational routine. This is no longer a game of “buy on the day-ahead market — sell on OKTE.”
Here’s a checklist for traders:
Counterparty status. Your buyer in Slovakia or Poland must be an Authorized CBAM Declarant. Check their status in the European CBAM Registry before signing deals.
Verifier accreditation. Find an auditing firm accredited in the EU (in line with Commission Implementing Regulation (EU) 2025/2547). A standard Ukrainian environmental report won’t do.
Volumes and balancing. Keep in mind that during import peaks (when monthly imports exceeded 850,000 MWh in the summer months), the entire 2.1 GW capacity is bought up almost completely. If you nominated a “clean” schedule from a solar plant, but cloud cover caused an imbalance that was covered by thermal generation — how will that be reflected in the final carbon report? These risks need to be factored into financial reserves.
Currency and collateral guarantees. Purchasing CBAM certificates requires the importer to freeze liquidity. Be prepared to be asked for bank guarantees or the deposit of funds in European accounts.
— How might CBAM affect contractual relations between the Ukrainian seller and the European electricity importer?
— The era of classic EFET contracts in their basic form is over. Contracts now include specific clauses or even a “CBAM Annex” that rewrites how risks are allocated.
Contracts now feature the following stringent terms:
Data Audit Clause. The seller is obligated to provide all primary generation data upon first request, and to cover all of the importer’s penalties if that data is rejected by the verifier.
Dynamic Pricing. The price of electricity is tied to the current CBAM certificate index on the European exchange.
Termination Events. If the EU regulator changes the calculation methodology or refuses to recognize documents provided by the Ukrainian side, the importer has the right to unilaterally suspend acceptance of electricity without paying a penalty.
— Who, in practice, might bear CBAM costs, how should this be reflected in contracts, and what risks need to be anticipated in advance?
— Under EU law, the responsible party is the CBAM declarant (the importer) (Art. 5 of Regulation 2023/956). It is the importer who buys certificates from their EU member state through the Common Central Platform (administered by the European Commission under Art. 20 of the Regulation) and files an annual declaration with their national supervisory authority.
But in practice, the importer is simply a trader who will never operate at a loss. So the economic burden is shifted 100% onto the Ukrainian exporter.
How is this codified in contracts?
The importer applies the formula: Price Paid to Exporter = EU Market Price − Cost of CBAM Certificates − Importer’s Organizational Margin.
The main hidden risk is the time gap and audit checks.
The importer declares and makes the final settlement for certificates based on annual results — by September 30 of the following year (Art. 6 of Regulation 2023/956 as amended by Regulation 2025/2083).
Then the National Competent Authority of the EU country comes into play (for example, Slovakia’s Ministry of Environment, MŽP SR, or Poland’s KOBiZE). Within the statutory timeframe, the national authority audits the submitted declaration. And if, during the review, a Slovak or Polish inspector finds that the documents on “zero” carbon profile provided by the Ukrainian side don’t meet the EU’s strict criteria, or were rejected by the verifier, they will discard the actual data and reassess the importer’s CBAM payments using the default tariff, plus impose penalties.
And this is where the real time bomb lies: 1 to 1.5 years after the physical delivery of the electricity, the European counterparty will come to the Ukrainian trader with a recourse claim to recover hundreds of thousands or millions of euros in losses. To minimize this risk, contracts need to build in the use of escrow accounts or apply specific financial insurance instruments.
— Could CBAM become a barrier to Ukraine’s further integration into the EU’s internal electricity market?
— Yes, this is the most serious threat. A structural paradox emerges: we are integrating on the market and technical level, but being cut off by a fiscal-climate instrument.
If, due to the bureaucratic difficulty of proving its “cleanliness,” Ukrainian electricity gets hit with the default charge, it will create a regulatory wall. European traders will simply stop including the Ukrainian interconnection in their trading algorithms. We’ll end up in a situation where physical transmission lines with a capacity of more than 2.1 GW sit empty or operate only in a one-way import direction, despite the fact that we are part of the unified ENTSO-E power system.
— How can a balance be found between the EU’s climate goals and the need to support the integration of the Ukrainian energy market?
— Balance is only possible through a pragmatic political and legal compromise. Brussels needs to recognize that Ukraine is a special case. Our energy sector has survived massive destruction from Russian attacks, yet we remain committed to the European Green Deal.
The path to balance is creating a Special Adaptation Mechanism (Green Transition Package) for Ukraine within the framework of the Energy Community.
The European Commission could grant us a temporary transition period or a simplified system for recognizing the carbon profile of Ukrainian NPPs and RES, in exchange for a clear commitment from Ukraine to launch a domestic emissions trading market (ETS) and complete Market Coupling by a set date.
— In your view, what steps does Ukraine need to take at the level of the state, the regulator, and market participants to prepare for CBAM?
— Symmetrical action is needed at three levels:
The state (the Verkhovna Rada and the Cabinet of Ministers): introducing a full-fledged national emissions trading system (ETS) in line with Directive 2003/87/EC. Article 9 of the CBAM Regulation clearly states that if a carbon tax has been paid in the country of origin, that amount is deducted from the payment due in the EU. It’s in our interest to raise the price of CO2 within Ukraine, so that money flows into our own budget for rebuilding the energy sector, rather than into the EU budget.
The regulator (NEURC): finalize all secondary legislation for Market Coupling and accelerate accession to the Association of Issuing Bodies (AIB), so that our Guarantees of Origin are technically compatible with the EECS system.
Market participants: stop hoping for the best. Producers need to already be undergoing MRV emissions-control audits with internationally accredited verifiers, and traders need to update their contractual legal frameworks.
— What needs to be done right now to keep Ukrainian electricity competitive on the European market?
— Move from words to targeted, practical action:
Build direct pools of low-carbon energy. Traders need to contract volumes directly from Energoatom, Ukrhydroenergo, or private RES producers under long-term direct PPAs.
Build a bridge to European verifiers. Sign framework agreements now with auditing firms accredited in Slovakia, Poland, or Romania.
Work with Guarantees of Origin. Obtain Ukrainian GOs from the NEURC registry for every “clean” megawatt produced, preparing a document package to prove there’s no double counting.
Create partnerships with authorized declarants in the EU. Don’t look for random spot-market buyers — build strategic relationships with reliable European players who have already been authorized by their national bodies.
— How do you see the prospects for electricity trade between Ukraine and the EU over the next 2–3 years?
— The next 12 months will be a period of turbulence. This will be a “CBAM stress test,” during which export volumes may temporarily dip due to regulatory shock, wariness among European importers, and legal uncertainty.
But over a 2–3 year horizon, I see a colossal breakthrough. Once we launch Market Coupling, integrate our Guarantees of Origin with the European AIB hub, and build clear emissions verification chains, Ukraine will turn into a key exporter of baseload and flexible “clean” energy for Central and Eastern Europe. We’ll become an integral part of the European balance.
— What opportunities could open up for Ukrainian companies if the issues of CBAM, verification of electricity origin, and market integration are properly resolved?
— If we do our homework, fundamental opportunities will open up for Ukrainian business:
Earning a “green premium.” We’ll be able to sell our kilowatts at a higher price than ordinary “mixed” electricity, since European industrial giants are specifically looking for carbon-free energy to meet their own environmental targets.
A boom in private investment in generation. Transparent access to the EU market through the CBAM-compliance mechanism will unlock billions in investment in new Ukrainian generation — battery energy storage systems (BESS), wind and solar farms, and biogas plants.
Turning Ukraine into an energy hub for Central and Eastern Europe. We’ll be able to provide balancing services to neighboring EU countries, using our pumped-storage plants and future storage capacity to smooth out peaks in Slovakia, Hungary, and Poland.
Ukraine will stop being a peripheral market and become one of the key architects of a new, decarbonized, and secure European energy system.
CBAM poses a far broader question for the Ukrainian energy market than simply additional costs on electricity exports. It’s about Ukraine’s ability to prove to the European market the real value of its generation — not only economic, but carbon value as well.
For Ukrainian traders, this means the need to rebuild their approach to contracting, verifying electricity origin, emissions accounting, and risk management — starting today. For the state, it means creating clear rules compatible with European mechanisms and accelerating market integration.
At the same time, Ukraine has something that must not be allowed to become a weakness: significant potential in nuclear, hydro, and renewable generation. If the country can ensure transparent verification of its carbon profile and fully integrate into the European market, Ukrainian electricity will have a chance to compete not on lower price, but on its low-carbon credentials.
So the main challenge CBAM poses for Ukraine isn’t simply avoiding an extra payment. The challenge is turning proof of the low-carbon nature of Ukrainian electricity into a real market advantage. And how quickly Ukraine builds the rules, infrastructure, and trust of its European partners for this will determine whether Ukrainian elec
