INTERVIEW: Ex-WTO chief urges special CBAM treatment for Ukraine

Pascal Lamy, the former World Trade Organization director-general who now sits on the advisory council of Ukrainian energy company DTEK, said Ukraine deserves special treatment under the EU's Carbon Border Adjustment Mechanism, arguing the war-torn country cannot be treated like any other trading partner.

"I do not think Ukraine can be considered as a sort of normal third country," Lamy said in an interview with Platts, part of S&P Global Energy, pointing to Kyiv's path toward EU accession and its commitment to align carbon pricing with the bloc over time.

Ukrainian industry has for months pressed the European Commission for CBAM exemptions, warning that Russia's war would compound the toll of CBAM on an economy already under severe strain. Ukraine ships large volumes of pig iron, steel billets and long steel products, along with some cement and aluminum, to the EU, leaving these sectors squarely exposed.

Lamy, who also served as the EU's trade commissioner, said Ukraine's electricity and steel exports sit at the heart of the issue. "Ukraine is likely to be a major energy exporter to the EU," he said, adding that this is already happening to some extent on the electricity side, "in terribly difficult conditions" as Russian strikes batter the country's power infrastructure.

Rather than a blanket exemption from CBAM, Lamy proposed a tailored trajectory tied to Ukraine's own decarbonization roadmap. "Ukraine should benefit from a specific CBAM trajectory," he said, describing it as "a sort of down payment" on future alignment with the EU's Emissions Trading System rather than a permanent carve-out.

War and CBAM

So far, the European Commission has granted no country an exemption from CBAM. In December, weeks before the CBAM's transitional phase took effect, EC Climate Commissioner Wopke Hoekstra downplayed the impact CBAM would have on Ukraine, pointing to its nuclear-heavy energy mix.

Any exemption would require the Commission to invoke Article 30.7 of the CBAM regulation, which allows exceptions for unforeseeable, exceptional and unprovoked events affecting the economic infrastructure of third countries.

But Lamy was clear that the war outweighs trade policy as the dominant force shaping Ukraine's energy system.

"The impact of the war and Russian disruptions on the electricity system of Ukraine are much larger as a shaping factor than any bit of CBAM," he said.

Kyiv has meanwhile pressed ahead with its own carbon pricing framework. Ukraine's Ministry of Economy released a draft law in May 2026 to establish a national emissions trading system, complete with a modernization fund to help channel ETS revenues into energy efficiency and low-carbon investment.

The scheme's first phase would run from 2028 until three years after martial law is lifted, with no overall emissions cap during that period.

The EU's CBAM aims to prevent carbon leakage by ensuring imported goods face similar carbon costs to those produced within the EU, potentially affecting trade flows of carbon-intensive products.

The definitive phase of CBAM began Jan. 1, 2026, following a transitional reporting period. The mechanism targets imports of goods from the iron and steel, aluminum, cement, hydrogen, fertilizers and electricity sectors, aiming to prevent carbon leakage where companies relocate production to regions with weaker climate policies.

Shift on CBAM

Lamy said his own views on carbon border measures have evolved. "I was not in favor of CBAM because at that time, I thought that the difference did not justify such an impediment to trade," he said of his years at the WTO and European Commission. "I have changed my mind given the numbers."

He said CBAM's influence today extends well beyond the mechanics of trade. "In a way, the political impact of CBAM is larger than its technical impact," Lamy said, an outcome he suggested was hardly unexpected given how the policy has forced governments and industries worldwide to confront carbon pricing head-on, whether or not they welcome it.

He pointed to a study he co-authored on CBAM's effect on India's steel industry, published by the Jacques Delors Institute in Brussels, saying it showed the mechanism has already reshaped industrial thinking even where governments resist it. "I have absolutely no doubt that the big [players] in the Indian steel industry know they have to adjust to carbon pricing," Lamy said.

The EU and India recently committed to establishing a technical dialogue on CBAM under their free trade agreement, with provisions designed to facilitate the deduction of carbon prices paid in India from EU border levies.

Grid and finance

Ukraine holds Europe's second-largest deep gas reserves after Norway, along with significant renewable potential, positioning it to help diversify the region's supply away from Russian energy.

Lamy said DTEK's push into renewables like wind and battery storage, and into decarbonization, was a key reason he joined the advisory board, alongside guarantees of anti-corruption controls at the company.

Faster EU grid integration is essential to the region's long-term energy security, Lamy said, though political resistance remains a barrier.

Lower average prices from a more connected grid benefit consumers but unsettle producers used to higher returns, he said, citing tensions between some countries as examples of the "purely political obstacles" still to be overcome.

This comes as the EU is working to integrate wider regional systems, such as those in the UK, Ukraine and the Balkans into the EU's internal electricity market by 2028.

Lamy said he is working with the Jacques Delors Institute and former Italian premier Enrico Letta on a broader push to complete EU electricity market integration by 2028. The effort focuses on finance, connectivity and energy, a framework to which Ukraine "has and will have to align and adjust."

Ukraine synchronized its electricity grid with the continental European network in March 2022, shortly after Russia's full-scale invasion began, enabling emergency power supplies from EU neighbors during subsequent attacks on energy infrastructure.

Maximizing power imports from the EU has been critical for Ukraine, particularly in winter as Russian strikes pound its power infrastructure. Imports hit a record high in February, though Ukraine can also boost revenue through occasional exports during the summer months.