Assessing different European Carbon Border Adjustment Mechanism implementations and their impact on trade partners

Communications Earth & Environment, vol. 4

Abstract

Abstract The European Union (EU) will implement a Carbon Border Adjustment Mechanism (CBAM) to reach its climate mitigation targets while avoiding the relocation of its industries to countries with less stringent climate policies (carbon leakage). The exact implementation and possible future extensions of such an EU CBAM are still being debated. Here we apply a throughflow-based accounting method on detailed trade network data to assess the coverage of different implementation options. Using a stylized comprehensive EU CBAM as benchmark, we then quantify how an EU CBAM may affect the EU’s trade partners by channeling the EU carbon price to other countries. We find that middle- and low-income countries for which the EU is an important export market would be disproportionally impacted even under conservative implementation options. We finally explore different international revenue recycling schemes to make the EU CBAM inclusive toward vulnerable countries and able to foster global climate cooperation.

Authors 4

1. Timothé Beaufils

   University of Potsdam · Leibniz Association · Potsdam Institute for Climate Impact Research

   Affiliation as printed

   Institute of Physics, Potsdam University, Potsdam, Germany

   Potsdam Institute for Climate Impact Research (PIK), Member of the Leibniz Association, Potsdam, Germany

2. Hauke Ward Aachen Institute of Environmental Science Department of Industrial Ecology

   Leiden University · Mercator Research Institute on Global Commons and Climate Change

   Affiliation as printed

   Institute of Environmental Science (CML), Department of Industrial Ecology, Leiden University, Leiden, Netherlands

   Mercator Research Institute for Global Commons and Climate Change, Berlin, Germany

3. Michael Jakob

   Mercator Research Institute on Global Commons and Climate Change · Ecologic Institute

   Affiliation as printed

   Ecologic Institute, Berlin, Germany

   Mercator Research Institute for Global Commons and Climate Change, Berlin, Germany

4. Leonie Wenz corresponding

   Leibniz Association · Mercator Research Institute on Global Commons and Climate Change · Potsdam Institute for Climate Impact Research

   Affiliation as printed

   Mercator Research Institute for Global Commons and Climate Change, Berlin, Germany

   Potsdam Institute for Climate Impact Research (PIK), Member of the Leibniz Association, Potsdam, Germany