Impacts of CBAM on EU trading partners: consequences for developing countries | AFD

This article analyzes the impact of the introduction of the Carbon Border Adjustment Mechanism (CBAM) on the European Union’s (EU) trading partners, focusing particularly on its potential socio-economic and external consequences for economies developing and emerging. It uses trade data and multi-regional input-output matrices (MRIOs) to study the uneven geographic and sectoral distribution of CBAM impacts. The introduction of CBAM by the EU is under discussion, and most of the literature on the subject has analyzed the consequences for EU economies. However, this carbon adjustment mechanism, which aims to reduce companies’ incentives to outsource their carbon emissions and promote a more widespread transition to a low-carbon economy, could have a disproportionate impact on some non-EU economies. Although most carbon revenues would be generated by Russia, China and Ukraine, the degree of exposure of economies exporting CBAM products to Europe varies considerably, with many developing economies having more than 2% of their exports and 1% of their production impacted. by this measure. The economies of Eastern Europe, mainly in the Balkans, as well as Mozambique, Zimbabwe and Cameroon, in Africa, are those where exports are most exposed. On a socio-economic level, Morocco and Tajikistan can also be included in the group of most exposed economies. The CBAM certainly constitutes an important step towards a European dynamic of carbon pricing. Its implementation conditions can also promote a global (rather than local) transition to a low-carbon transition if the carbon revenues generated by this mechanism are used to support the most affected developing countries outside the EU.