Ukraine now has four competing ETS drafts, and its CBAM deduction hangs on the outcome

Ukraine's project to build a national emissions trading system has fragmented into four competing draft laws. Per EcoPolitic reporting picked up by Carbon Pulse on August 17, 2026, the government draft prepared by the Ministry of Economy, Environment and Agriculture now sits alongside three rival drafts registered in the Verkhovna Rada within 16 days of each other: No. 15386 on July 7, No. 15386-1 on July 21, and No. 15386-2 on July 23. The texts differ on who manages the carbon market, where the revenues go, which sectors are covered, and how free allocation is handled, and business groups including the European Business Association complain that the version now moving is advancing without consultation or public disclosure.

The outcome matters well beyond Kyiv. A functioning national emissions trading system (NETS) is Ukraine's most direct route to a lower CBAM bill, because a domestic carbon price effectively paid by Ukrainian producers could be deducted from the certificate obligation their EU buyers face, the mechanism covered in the CBAM carbon price deduction guide. For the exporters tracked in the CBAM Ukraine country guide, the design fight in the Rada is also a fight about a future EU border cost.

Four drafts for one carbon market

Four alternative draft laws for Ukraine's NETS are now on the table: the government draft from the Ministry of Economy, Environment and Agriculture plus Rada drafts No. 15386, No. 15386-1 and No. 15386-2, per EcoPolitic reporting picked up by Carbon Pulse on August 17, 2026. The table below sets out the four texts and what EcoPolitic reports about each.

The procedural contrast drives the complaints. The ministry draft went through a comment period after its May 15 publication and collected recommendations from the European Commission and amendment proposals from the European Business Association (EBA). The parliamentary alternatives did not: EcoPolitic reported that draft No. 15386 was registered with no text, explanatory note, or supporting documents published on the Rada's bill page, and that none of the three Rada drafts went through public consultation.

What the drafts disagree on, and what business objects to

The four texts diverge on four design questions, per the EcoPolitic reporting: who manages the market, where the revenues go, which sectors are covered, and how free allocation works. Draft No. 15386 directs revenues into an existing state fund, while draft No. 15386-1 creates a dedicated fund that channels quota-trading revenues into decarbonisation and innovation projects, and it stretches the system's rollout across three phases instead of two.

The EBA's position is on the record and negative. In comments published by EcoPolitic on August 4, members of the association's Industrial Ecology and Sustainable Development Committee concluded: "In view of the above, the Association does not support draft law No. 15386 in its current form." The six objections the EBA raised against that draft are listed below.

• Absence of legally defined guidelines for how the allowance price forms
• An accelerated reduction in free allowance allocation
• Narrowed decarbonisation support mechanisms and less financing for investment projects
• Revenues directed to an existing state fund rather than a separate modernisation fund
• Regulatory and financial-management functions consolidated in a single body
• Mandatory carbon pricing for companies exporting to the EU, a provision the association says needs further legal assessment because it could create a risk of double carbon taxation given payments already made under CBAM

In an August 12 statement reported by EcoPolitic, the association set out what it wants instead: "The system should ensure a gradual transition for Ukrainian industry, predictable rules for carbon price formation, sufficient transitional periods, and the ability to direct NETS revenues toward the decarbonization and modernization of enterprises." It also flagged an administrative gap: "Without established institutional capacity and the necessary expertise, ensuring effective administration of a complex quota trading system will be difficult."

Why the winning design shapes the CBAM deduction

The connection to CBAM runs through Article 9 of Regulation (EU) 2023/956: a carbon price effectively paid in the country of origin can be deducted from the number of CBAM certificates surrendered on the same embedded emissions, so the NETS design chosen in Kyiv will determine how much of a Ukrainian producer's future domestic carbon cost comes back off the EU border bill. That stakes framing is this site's analysis, consistent with its carbon-price-deduction coverage; no deduction exists today because no Ukrainian carbon market yet operates.

The design details decide how much a future deduction would be worth. Under the Commission's draft implementing rules, a foreign scheme must be binding, must cover the relevant operators without discrimination, and counts only the price effectively paid, meaning free allocation reduces the deductible amount. That gives the Rada's free-allocation argument a double edge: generous free allocation softens the domestic cost for Ukrainian industry, but it also shrinks the carbon price its EU buyers could later deduct through the Article 9 deduction workflow. Sector coverage cuts the same way, since only installations actually paying the domestic price generate anything to deduct. The recognition machinery is itself still provisional: the Commission's draft implementing regulation of May 13, 2026 awaits a member-state vote expected in September 2026, per Carbon Pulse citing a Commission official.

The longer horizon points the same way: as an EU accession candidate, Ukraine is expected eventually to join the EU ETS itself, at which point CBAM would stop applying to Ukrainian goods at all. A NETS misaligned with EU rules would deliver domestic costs without border relief.

The squeeze this lands in

The fragmentation arrives while Ukrainian long-product exports to the EU are down about 42 percent year-on-year in the first half of 2026, per GMK Center, and while Ukrainian industry formally petitions Kyiv to seek EU exemptions. Ukrmetallurgprom and the Federation of Employers of Ukraine lodged those petitions in mid-August, as covered in this site's report on the exemption appeals mounting alongside EU steel quota cuts. They followed Pascal Lamy's July call for a Ukraine CBAM exemption conditioned on decarbonisation milestones.

The exemption track and the NETS track are alternative answers to the same commercial problem. An exemption asks Brussels to switch the mechanism off; a recognized carbon price asks Kyiv to build something Brussels can count, on a track within Ukraine's own control. That is why a process EcoPolitic describes as running without debate or disclosure worries the businesses that would pay the resulting price. The 2026 CBAM cost remains modest, with the CBAM factor at 2.5 percent and free allocation covering 97.5 percent, but the factor rises every year until free allocation ends in 2034.

What happens next

The immediate venue is the Rada's committee stage, where EcoPolitic reports draft No. 15386-2 is already being presented despite all drafts formally holding "submitted for review" status. Three things are worth watching from here:

• Whether the committees consolidate the four texts or advance No. 15386-2 as tabled, and whether the advanced text is published for scrutiny before a vote
• Whether the design that emerges satisfies the recognition tests in the Commission's Article 9 implementing rules, expected to go to a member-state vote in September 2026 per Carbon Pulse
• Whether the autumn CBAM review negotiations touch Ukraine at all, now that Peter Liese has set ETS review positions for year-end with trilogues from January

For EU importers of Ukrainian steel and pig iron, nothing changes today. Ukrainian goods remain fully covered, no deduction is available for a carbon price that does not yet exist, and the first CBAM declaration falls due on September 30, 2027. This site will report which of the four drafts survives committee, and whether the text that emerges is one the EU can recognize.