Global Impact of the Carbon Border Adjustment Mechanism – A Quantitative Assessment
-
Xiaobei He
,
Fan Zhai
Abstract
While the European Union’s Carbon Border Adjustment Mechanism (CBAM) has a global impact by design, the scale of its “spillover effects” on other countries is seldom studied. This paper contributes to academic and policy discussions by using a recursive dynamic CGE model to assess quantitatively the impact of the CBAM on other countries, especially developing countries, and identify countries most vulnerable to its spillover effects. The simulation results suggest the CBAM widens the gap between developed and developing countries in terms of GDP and welfare. Thus, it may worsen the unequal income and welfare distributions between rich and poor economies and curb the capacity of low-income countries to decarbonize their economies. To ensure the low-carbon transition of advanced economies does not negatively or unfairly impact developing countries, international organizations should play a key role in identifying and addressing the cross-border spillover effects of climate policies, especially on the balances of payments and growth trajectories of vulnerable countries.
Funding source: Task Force on Climate, Development and the IMF
-
Research funding: This work was funded by Task Force on Climate, Development and the IMF.
Tariff equivalents on CBAM products (%).
| Countries/regions | Scenario 1 | Scenario 2 | ||||||
|---|---|---|---|---|---|---|---|---|
| Chemicals | Non-metallic metals | Iron and steel | Non-ferrous metals | Chemicals | Non-metallic metals | Iron and steel | Non-ferrous metals | |
| Selected advanced economies | ||||||||
|
|
||||||||
| Australia and New Zealand (anz) | 1.4 | 2.1 | 1.0 | 2.6 | 5.4 | 6.1 | 4.6 | 12.4 |
| Japan (jpn) | 1.7 | 3.6 | 0.9 | 0.3 | 5.9 | 6.9 | 5.6 | 3.5 |
| Canada (can) | 1.2 | 2.8 | 2.6 | 0.4 | 6.1 | 6.4 | 7.7 | 6.0 |
| United States of America (USA) | 0.9 | 2.7 | 1.6 | 0.5 | 5.0 | 6.6 | 6.2 | 6.1 |
| South Korea (kor) | 0.5 | 3.4 | 1.4 | 0.2 | 6.2 | 8.2 | 9.2 | 5.7 |
|
|
||||||||
| BRICs | ||||||||
|
|
||||||||
| China (chn) | 2.1 | 5.7 | 3.3 | 0.7 | 13.2 | 16.6 | 14.9 | 11.4 |
| India (ind) | 2.6 | 18.5 | 15.4 | 1.7 | 13.8 | 32.9 | 35.1 | 16.6 |
| Brazil (bra) | 0.8 | 3.8 | 2.7 | 4.4 | 3.4 | 6.0 | 5.6 | 9.1 |
| Russia (rus) | 3.5 | 5.9 | 4.1 | 0.1 | 13.0 | 14.1 | 15.1 | 10.0 |
| South Africa (zaf) | 1.2 | 10.2 | 6.5 | 2.1 | 15.2 | 23.4 | 18.8 | 15.1 |
|
|
||||||||
| Selected other developing economies | ||||||||
|
|
||||||||
| Kazakhstan (kaz) | 3.6 | 6.5 | 17.3 | 4.2 | 17.3 | 14.0 | 48.7 | 10.8 |
| Ukraine (ukr) | 0.8 | 7.2 | 10.4 | 2.7 | 15.0 | 19.6 | 27.6 | 17.1 |
| Turkey (tur) | 2.0 | 6.3 | 1.8 | 0.7 | 8.0 | 13.1 | 10.1 | 5.6 |
| Mexico (mex) | 2.2 | 5.4 | 3.2 | 0.3 | 7.8 | 10.8 | 10.1 | 5.4 |
| Egypt (egy) | 3.4 | 2.3 | 6.4 | 1.5 | 12.5 | 5.7 | 20.8 | 11.3 |
| Mozambique (moz) | 1.3 | 2.1 | 0.0 | 0.4 | 10.8 | 8.6 | 19.7 | 31.4 |
|
|
||||||||
| Selected regions | ||||||||
|
|
||||||||
| Association of Southeast Asian Nations (ASEAN) | 1.6 | 9.6 | 3.0 | 1.8 | 7.0 | 17.1 | 14.2 | 7.8 |
| Latin American Countries (lac) | 2.4 | 3.4 | 5.1 | 0.6 | 6.2 | 6.2 | 12.9 | 4.2 |
| Sub-Saharan Africa (SSA) | 1.9 | 4.4 | 4.1 | 0.2 | 5.9 | 7.5 | 14.4 | 3.4 |
| Middle East & North Africa (MENA) | 5.2 | 5.5 | 3.7 | 3.0 | 10.1 | 8.7 | 9.6 | 12.2 |
| Least developed country (LDC) | 3.0 | 8.7 | 2.4 | 0.3 | 10.9 | 15.5 | 11.9 | 6.5 |
| Rest of the world (row) | 13.5 | 5.5 | 3.3 | 0.8 | 36.1 | 12.8 | 15.1 | 7.5 |
Impacts on exports of CBAM products to the EU (percentage change from the baseline, 2030).
| Countries/regions | Scenario 1 | Scenario 2 | ||||||
|---|---|---|---|---|---|---|---|---|
| Chemicals | Non-metallic metals | Iron and steel | Non-ferrous metals | Chemicals | Non-metallic metals | Iron and steel | Non-ferrous metals | |
| Selected advanced economies | ||||||||
|
|
||||||||
| Australia and New Zealand (anz) | −5.0 | −6.1 | 0.8 | −20.4 | −10.7 | −13.0 | −2.4 | −54.9 |
| Japan (jpn) | −6.9 | −15.0 | 1.5 | 0.3 | −14.7 | −18.0 | −8.9 | 2.7 |
| Canada (can) | −3.2 | −10.6 | −10.0 | −1.2 | −15.9 | −15.4 | −20.9 | −19.6 |
| United States of America (USA) | −0.6 | −9.8 | −3.3 | −2.2 | −8.6 | −16.3 | −12.4 | −20.5 |
| South Korea (kor) | 2.1 | −14.2 | −1.8 | 1.1 | −17.0 | −24.4 | −27.9 | −16.4 |
|
|
||||||||
| BRICs | ||||||||
|
|
||||||||
| China (chn) | −9.0 | −24.7 | −13.5 | −3.8 | −49.3 | −55.0 | −49.4 | −50.5 |
| India (ind) | −12.8 | −65.2 | −58.5 | −11.8 | −52.1 | −82.4 | −84.2 | −69.7 |
| Brazil (bra) | −0.4 | −16.8 | −10.5 | −34.2 | 2.7 | −13.6 | −9.4 | −40.5 |
| Russia (rus) | −18.3 | −25.9 | −17.3 | 4.4 | −48.6 | −45.5 | −48.3 | −40.5 |
| South Africa (zaf) | −8.7 | −44.3 | −30.5 | −16.0 | −54.2 | −67.8 | −58.2 | −62.0 |
|
|
||||||||
| Selected developing economies | ||||||||
|
|
||||||||
| Kazakhstan (kaz) | −19.2 | −29.5 | −63.9 | −30.7 | −56.9 | −41.9 | −90.8 | −38.2 |
| Ukraine (ukr) | 2.3 | −30.1 | −43.4 | −17.5 | −53.1 | −59.7 | −74.4 | −66.3 |
| Turkey (tur) | −8.5 | −28.2 | −4.1 | −3.8 | −27.0 | −43.9 | −31.6 | −15.0 |
| Mexico (mex) | −10.4 | −25.7 | −13.7 | −0.4 | −26.4 | −36.5 | −32.5 | −14.8 |
| Egypt (egy) | −18.3 | −7.0 | −29.2 | −10.9 | −47.3 | −10.0 | −65.1 | −50.4 |
| Mozambique (moz) | −3.8 | −6.0 | 8.9 | 0.7 | −99.9 | −78.3 | −98.6 | 70.3 |
|
|
||||||||
| Selected regions | ||||||||
|
|
||||||||
| Association of Southeast Asian Nations (ASEAN) | −6.1 | −41.9 | −12.3 | −13.4 | −21.4 | −56.6 | −48.1 | −31.0 |
| Latin American Countries (lac) | −12.3 | −14.7 | −24.1 | −2.7 | −16.4 | −14.2 | −43.6 | −3.7 |
| Sub-Saharan Africa (SSA) | −8.9 | −19.9 | −18.8 | 0.5 | −15.4 | −22.0 | −49.5 | 2.8 |
| Middle East & North Africa (MENA) | ||||||||
| Least developed country (LDC) | −29.0 | −26.2 | −16.8 | −24.5 | −37.4 | −25.8 | −28.8 | −54.3 |
| Rest of the world (row) | −15.8 | −38.5 | −8.5 | 0.4 | −42.4 | −53.8 | −41.6 | −25.0 |
Impacts on total exports to the EU (percentage change from the baseline, 2030).
| Countries/regions | Scenario 1 | Scenario 2 |
|---|---|---|
| Selected advanced economies | ||
|
|
||
| Australia and New Zealand (anz) | 0.0 | −3.1 |
| Japan (jpn) | −0.4 | −0.7 |
| Canada (can) | −0.1 | −7.1 |
| United States of America (USA) | 0.2 | −5.9 |
| South Korea (kor) | 0.4 | −7.5 |
|
|
||
| BRICs | ||
|
|
||
| China (chn) | −0.4 | −19.2 |
| India (ind) | −2.7 | −21.9 |
| Brazil (bra) | −0.2 | −1.5 |
| Russia (rus) | −2.6 | −12.1 |
| South Africa (zaf) | −4.0 | −34.9 |
|
|
||
| Selected developing economies | ||
|
|
||
| Kazakhstan (kaz) | −1.4 | −46.8 |
| Ukraine (ukr) | −11.8 | −38.9 |
| Turkey (tur) | −0.7 | −11.3 |
| Mexico (mex) | −1.0 | −6.9 |
| Egypt (egy) | −2.4 | −23.2 |
| Mozambique (moz) | −0.5 | −67.4 |
|
|
||
| Selected regions | ||
|
|
||
| Association of Southeast Asian Nations (ASEAN) | −0.1 | −13.0 |
| Latin American Countries (lac) | −1.3 | −7.0 |
| Sub-Saharan Africa (SSA) | −0.2 | 5.2 |
| Middle East & North Africa (MENA) | −1.4 | −2.2 |
| Least developed country (LDC) | 0.0 | −2.9 |
| Rest of the world (row) | −7.4 | −33.0 |
Impacts on GDP (percentage change from the baseline, 2030).
| Countries/regions | Scenario 1 | Scenario 2 |
|---|---|---|
| Selected advanced economies | ||
|
|
||
| Australia and New Zealand (anz) | −0.008 | −0.063 |
| Japan (jpn) | −0.002 | −0.016 |
| Canada (can) | −0.007 | −0.070 |
| United States of America (USA) | −0.002 | −0.042 |
| South Korea (kor) | 0.004 | −0.058 |
|
|
||
| BRICs | ||
|
|
||
| China (chn) | −0.007 | −0.170 |
| India (ind) | −0.043 | −0.272 |
| Brazil (bra) | −0.008 | −0.052 |
| Russia (rus) | −0.193 | −0.636 |
| South Africa (zaf) | −0.021 | −0.326 |
|
|
||
| Selected developing economies | ||
|
|
||
| Kazakhstan (kaz) | −0.045 | −1.777 |
| Ukraine (ukr) | −0.207 | −0.744 |
| Turkey (tur) | −0.021 | −0.271 |
| Mexico (mex) | −0.015 | −0.089 |
| Egypt (egy) | −0.027 | −0.275 |
| Mozambique (moz) | −0.027 | −2.507 |
|
|
||
| Selected regions | ||
|
|
||
| Association of Southeast Asian Nations (ASEAN) | −0.013 | −0.201 |
| Latin American Countries (lac) | −0.013 | −0.089 |
| Sub-Saharan Africa (SSA) | −0.020 | −0.085 |
| Middle East & North Africa (MENA) | −0.036 | −0.168 |
| Least developed country (LDC) | −0.005 | −0.055 |
| Rest of the world (row) | −0.109 | −0.466 |
Changes in welfare from the baseline (in USD bn, 2030).
| Countries/regions | Scenario 1 | Scenario 2 |
|---|---|---|
| Selected advanced economies | ||
|
|
||
| Australia and New Zealand (anz) | −0.3 | −2.0 |
| Japan (jpn) | 0.2 | 0.0 |
| Canada (can) | −0.2 | −2.0 |
| United States of America (USA) | −0.2 | −10.0 |
| South Korea (kor) | 0.3 | −1.0 |
| EU (eur) | 10.7 | 146 |
| UK, Switzerland, and Norway (usn) | 0.7 | 10 |
|
|
||
| BRICs | ||
|
|
||
| China (chn) | −1.1 | −46.0 |
| India (ind) | −1.8 | −15.0 |
| Brazil (bra) | −0.2 | −2.0 |
| Russia (rus) | −4.7 | −19.0 |
| South Africa (zaf) | −0.2 | −2.0 |
|
|
||
| Selected developing economies | ||
|
|
||
| Kazakhstan (kaz) | −0.2 | −9.0 |
| Ukraine (ukr) | −0.7 | −3.0 |
| Turkey (tur) | −0.3 | −5.0 |
| Mexico (mex) | −0.3 | −2.0 |
| Egypt (egy) | −0.2 | −2.0 |
| Mozambique (moz) | 0.0 | −1.0 |
|
|
||
| Selected regions | ||
|
|
||
| Association of Southeast Asian Nations (ASEAN) | −0.5 | −12.0 |
| Latin American Countries (lac) | −0.7 | −4.0 |
| Sub-Saharan Africa (SSA) | −0.5 | −2.0 |
| Middle East & North Africa (MENA) | −2.7 | −14.0 |
| Least developed country (LDC) | 0.0 | 0.0 |
| Rest of the world (row) | −0.4 | −2.0 |
References
Bao, Q., L. Tang, Z. Zhang, H. Qiao, and S. Wang. 2013. “Impacts of Border Carbon Adjustments on China’s Sectoral Emissions: Simulations with a Dynamic Computable General Equilibrium Model.” China Economic Review 24: 77–94. https://doi.org/10.1016/j.chieco.2012.11.002.Suche in Google Scholar
Böhringer, C., J. C. Carbone, and T. F. Rutherford. 2014. “Embodied Carbon Tariffs.” ZenTra Working Papers in Transnational Studies 25: 1–44.Suche in Google Scholar
Boston Consulting Group. 2020. “How an EU Carbon Border Tax Could Jolt World Trade.” Boston Consulting Group Article. https://www.bcg.com/publications/2020/how-an-eu-carbon-border-tax-could-jolt-world-trade.Suche in Google Scholar
Gros, D. 2009. “Global Welfare Implications of Carbon Border Taxes.” CEPS working document 315: 1–19.10.2139/ssrn.1430327Suche in Google Scholar
Korpar, N., M. Larch, and R. Stöllinger. 2023. “The European Carbon Border Adjustment Mechanism: A Small Step in the Right Direction.” International Economics and Economic Policy 20 (1): 95–138. https://doi.org/10.1007/s10368-022-00550-9.Suche in Google Scholar
Melitz, M. J. 2003. “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity.” Econometrica 71 (6): 1695–1725.10.1111/1468-0262.00467Suche in Google Scholar
Monjon, S., and P. Quirion. 2011. “Addressing Leakage in the EU ETS: Border Adjustment or Output-Based Allocation?” Ecological Economics 70: 1957–71. https://doi.org/10.1016/j.ecolecon.2011.04.020.Suche in Google Scholar
Mortha, A., T. H. Arimura, S. Takeda, and T. Chesnokova. 2023. “Effect of a European Carbon Border Adjustment Mechanism on the APAC Region: A Structural Gravity Analysis.” In Research Institute of Economy, Trade and Industry Discussion Paper August 2023 No. 23-E-058, 23058. RIETI.Suche in Google Scholar
Tang, L., Q. Bao, Z. Zhang, and S. Wang. 2015. “Carbon-based Border Tax Adjustments and China’s International Trade: Analysis Based on a Dynamic Computable General Equilibrium Model.” Environmental Economics and Policy Studies 17: 329–60. https://doi.org/10.1007/s10018-014-0100-3.Suche in Google Scholar
The African Climate Foundation and London School of Economics and Political Science. 2024. “Implications for African Countries of a Carbon Border Adjustment Mechanism in the EU.” https://africanclimatefoundation.org/research-article/implications-for-african-countries-of-a-carbon-border-adjustment-mechanism-in-the-eu/.Suche in Google Scholar
UNCTAD. 2021. A European Union Carbon Border Adjustment Mechanism: Implications for Developing Countries. Geneva: UNCTAD Publications.Suche in Google Scholar
Van der Mensbrugghe, D. 2019. “The Environmental Impact and Sustainability Applied General Equilibrium (ENVISAGE) Model.”Suche in Google Scholar
Weisbach, D. A., J. Elliott, I. Foster, S. Kortum, and T. Munson. 2013. “Unilateral Carbon Taxes, Border Tax Adjustments, and Carbon Leakage.” Theoretical Inquiries in Law 14: 207–44. https://doi.org/10.1515/til-2013-012.Suche in Google Scholar
Zachmann, G., and B. McWilliams. 2020. “A European Carbon Border Tax: Much Pain, Little Gain.” In Policy Contribution, 05/2020. Brussels, Belgium: Bruegel.Suche in Google Scholar
Zhai, F. 2019. “China’s Belt and Road Initiative: A Preliminary Quantitative Assessment.” Journal of Asian Economics 55: 84–92. https://doi.org/10.1016/j.asieco.2017.12.006.Suche in Google Scholar
Zimmer, M., and A. Holzhausen. 2020. “EU Carbon Border Adjustments and Developing Country Exports: Saving the Worst for the Last.” Allianz Research. https://www.allianz-trade.com/en_global/APAC/apac-economic-research/EU-carbon-border-adjustments-and-developing-country-exports-saving-the-worst-for-the-last.html.Suche in Google Scholar
© 2025 Walter de Gruyter GmbH, Berlin/Boston
