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Economic Assessment of the Consequences of the Carbon Border Adjustment Mechanism Introduction for the Regional Industrial Complex (on the Example of the Sverdlovsk Region)

Author

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  • Natalia V. Starodubets
  • Yulia O. Grishchenko
  • Irina S. Belik
  • Natalia L. Nikulina

Abstract

Concern about the problem of anthropogenic climate change has led to the active development of various tools to reduce greenhouse gas emissions. One such tool to combat carbon leakage is the carbon border adjustment mechanism, which was adopted by the European Union in 2021. Starting in 2026, carbon payments will affect all exporters of carbon-intensive products to the EU. The purpose of the article is an economic assessment of the consequences of the introduction of the carbon border adjustment mechanism for the regional industrial complex by studying the case of the Sverdlovsk region. The hypothesis of the study is to substantiate the need to take into account the economic losses of enterprises from carbon regulation measures in the formation of regional and country strategies for low-carbon development. An overview of carbon regulation tools is made, and the place of the carbon border adjustment mechanism is shown. A detailed description of the calculation procedure is given. An economic assessment of potential losses for enterprises of the Sverdlovsk region from the introduction of transboundary carbon regulation was carried out according to three scenarios for determining the carbon intensity of products: by actual values (scenario 1); according to average Russian values (scenario 2); according to the worst 10% EU installations (scenario 3). The results showed that annual payments for the enterprises of the Sverdlovsk region would amount to 73.7 million euros (scenario 1), 95.4 million euros (scenario 2), 73.0 million euros (scenario 3). In the current situation, scenario 2 is the most probable, in which the most progressive enterprises in terms of applied technologies would suffer the maximum losses. To minimize payments, it is proposed to introduce a methodology for accounting for greenhouse gas emissions in the context of manufactured products, develop in-country tools for carbon regulation, and stimulate the introduction of low-carbon technologies. The tools proposed by the authors can be used by employees of enterprises to assess the expected costs of introducing carbon regulation. Also, the toolkit can be used by regional decision makers to assess the losses of the region's budget and changes in the structure of exports due to transboundary carbon regulation, and to justify financial support measures for enterprises.

Suggested Citation

  • Natalia V. Starodubets & Yulia O. Grishchenko & Irina S. Belik & Natalia L. Nikulina, 2022. "Economic Assessment of the Consequences of the Carbon Border Adjustment Mechanism Introduction for the Regional Industrial Complex (on the Example of the Sverdlovsk Region)," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 21(4), pages 708-733.
    • Handle: RePEc:aiy:jnjaer:v:21:y:2022:i:4:p:708-733
    DOI: http://dx.doi.org/10.15826/vestnik.2022.21.4.025
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    References listed on IDEAS

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    More about this item

    Keywords

    carbon border adjustment mechanism; carbon intensity of products; accounting for greenhouse gas emissions; carbon regulation tools; low-carbon technologies; greenhouse gas emissions in metallurgy.;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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