Research on the Inhibitory Effect of the EU’s Carbon Border Adjustment Mechanism on Carbon Leakage

Associated with more ambitious targets for reducing emissions, the European Union (EU) plans to implement the Carbon Border Adjustment Mechanism (CBAM) fully in 2026, aiming to reduce carbon leakage and competitiveness concerns by imposing tariffs on carbon-intensive imports, which is expected to si...

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Bibliographic Details
Published inSustainability Vol. 16; no. 17; p. 7429
Main Authors Lan, Tian, Tao, Ran
Format Journal Article
LanguageEnglish
Published Basel MDPI AG 01.09.2024
Subjects
Air quality management
Carbon
Climate change
Climate policy
Costs
Economic development
Economic growth
Emission standards
Emissions control
Emissions credit trading
Emissions trading
Energy consumption
Equilibrium
Exports
International aspects
International trade
Land use
Paris Agreement
Europe
China
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Summary:Associated with more ambitious targets for reducing emissions, the European Union (EU) plans to implement the Carbon Border Adjustment Mechanism (CBAM) fully in 2026, aiming to reduce carbon leakage and competitiveness concerns by imposing tariffs on carbon-intensive imports, which is expected to significantly impact its trade partners. Existing research has focused on CBAM’s impact on macroeconomic indicators but has insufficiently addressed its effects on global and regional carbon leakage, especially in non-EU countries like China. This research offers a detailed analysis of industry-specific leakage rates and integrates both global and regional impacts by employing the dynamic recursive GTAP-E general equilibrium model to numerically simulate CBAM’s inhibitory effect on carbon leakage under different carbon tariff scenarios, while also exploring the synergistic effects of anti-leakage policies in non-EU countries. Our simulations indicate the following: (1) CBAM effectively inhibits carbon leakage, with greater inhibition observed at higher tax rates and with the expansion of covered industries. (2) Establishing China’s domestic carbon market pricing can further reduce regional carbon leakage rates. Implementing global export carbon tax policies will significantly diminish the risk of global carbon leakage. (3) The implementation of CBAM is projected to reduce China’s total exports to the EU, though this loss will be partly offset by trade diversion effects. Carbon-intensive industries are more adversely affected in the short term, while all industries except fossil fuels face inevitable long-term negative impacts.
ISSN:2071-1050
2071-1050
DOI:10.3390/su16177429