BRUSSELS — Ukrainian steelmakers say the EU’s new carbon border tax is prompting European customers to cancel orders, threatening one of the war-torn country’s most important sources of export revenue.

The Carbon Border Adjustment Mechanism, which came into force in January, requires importers to pay a carbon fee on certain foreign-made industrial goods, including steel. The point is to wean the dirtiest industries off planet-warming fossil fuels.

But Ukrainian steel giants, struggling with the effects of Russia’s four-year full-scale invasion, say they need a temporary exemption from the CBAM, noting it has already chased away regular buyers.

Metals are one of Ukraine’s biggest export industries, worth nearly $4 billion in 2023 according to the World Bank. The EU is by far its biggest market, with Poland alone accounting for a third of Ukraine’s metal exports.

At a roundtable talk last week, the CEO of ArcelorMittal Kryvyi Rih — one of Ukraine’s largest steelmakers — said the CBAM had cost his company the European market “almost instantly.”

“Once customers learned about the additional duty [CBAM payment] of $60 to $90 per ton, they canceled all orders for the first quarter of 2026 — about 300,000 tons,” Mauro Longobardo said.

The company also shut down one of its mills and claimed the loss of “at least 3,400 jobs” due to the CBAM, as no market proved able to absorb exports once destined for EU member states.

Metinvest, Ukraine’s largest miner and steelmaker, also says it’s struggling with the CBAM.

“The EU is the main market for Ukrainian steelmakers, who are operating under significantly worse conditions than their competitors,” said a company spokesperson in an email to POLITICO. “Formally, CBAM pursues environmental objectives, but in practice it also functions as a tool to protect the European market.”

Steel and cement lobbies in Europe have largely applauded the CBAM, seeing it as putting them on an equal footing with foreign competitors who operate under weaker pollution regulations and could thus flood the bloc with dirtier and cheaper products.

But in Ukraine, which is jockeying to join the EU, industries also face the calamity of war. Even so, at the outset of the CBAM negotiations in the bloc, both Ukrainian and Russian producers complained the carbon regime would unfairly hurt their industries — before their militaries laid waste to key steelmaking areas in the eastern Donbas region in Ukraine after Moscow’s 2022 invasion.

“We are operating under shelling, with disruptions to energy supply, workforce losses and constant uncertainty,” said a spokesperson for Metinvest in written comments. “Therefore, we appeal to our European partners: While Ukraine is ready to move in line with EU rules, it needs transitional arrangements and support to prepare for these requirements.”

Metinvest added the EU could consider channeling potential CBAM payments for Ukrainian steel into “dedicated accounts” that could then modernize Ukrainian companies and simultaneously increase “demand for European technologies.”

Last year, Ukraine was one of the largest exporters of steel to the EU along with India and China. But under the CBAM and the broader Emissions Trading System — the bloc’s landmark cap-and-trade framework — domestic producers are being incentivized both to go green and to sell within European markets, where carbon pricing rules.

Trade wars with Washington have also popularized tariffs as an economic weapon and have spread protectionism. Late Monday, the EU reached a temporary deal to halve imports of all foreign steel and place hefty tariffs on large orders in an effort to favor bloc-made steel.