Carbon Border Adjustments: The potential effects of the EU CBAM along the supply chain

Antoine Dechezleprêtre, Antton Haramboure, Clara Kögel, Guy Lalanne and Norihiko Yamano

No 2025/02, OECD Science, Technology and Industry Working Papers from OECD Publishing

Abstract: Disparities in carbon pricing and other climate policies across countries can raise the risk of carbon leakage. To address this, the European Union introduced a Carbon Border Adjustment Mechanism (CBAM) which will require importers of certain energy-intensive goods to pay a levy on embedded emissions. This paper combines multiple data sources to measure the coverage of the CBAM in terms of trade flows and emissions and uses an enhanced input-output model to simulate the impact of the CBAM on value added and emissions across sectors and countries, accounting for supply chain linkages. Results show that the CBAM can effectively prevent carbon leakage. However, it only partially mitigates the negative effects of higher carbon prices and free allowances removal on the value added of CBAM-protected industries and negatively affects downstream EU industries.

Keywords: Carbon Border Adjustment; Carbon Leakage; Climate Policy; International Trade (search for similar items in EconPapers)
JEL-codes: F14 F17 F18 Q56 (search for similar items in EconPapers)
Date: 2025-01-29
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Persistent link: https://EconPapers.repec.org/RePEc:oec:stiaaa:2025/02-en

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