The carbon border adjustment mechanism: consequences for trade and development in the Global South

Priyaranjan Jha and Advitha Arun

Chapter 35 in Elgar Encyclopedia of International Trade, 2026, pp 178-183 from Edward Elgar Publishing

Abstract: The European Union's Carbon Border Adjustment Mechanism (CBAM) is a landmark policy designed to prevent carbon leakage by levying charges on imports based on their embedded emissions. While aimed at aligning global trade with climate goals, CBAM has far-reaching consequences for developing countries, whose exports are often more carbon-intensive and less adaptable to rapid decarbonization. This entry synthesizes recent economic modeling, environmental impact assessments, and policy analyses to examine CBAM's implications for trade flows, GDP, employment, and emissions in the Global South. It highlights uneven regional exposure, modest global emissions reductions, and the potential for CBAM to exacerbate trade inequalities and geopolitical tensions. The analysis also reviews legal constraints under World Trade Organization rules and explores policy responses, from revenue recycling to phased implementation and targeted exemptions. By integrating economic, environmental, and equity perspectives, the entry provides a comprehensive assessment of CBAM's challenges and opportunities for developing economies.

Keywords: Carbon border adjustment mechanism; Developing countries; Carbon leakage; Trade and competitiveness; Climate equity; Carbon intensive industries (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035327492
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