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

Author

Listed:
  • Antoine Dechezleprêtre
  • Antton Haramboure
  • Clara Kögel
  • Guy Lalanne
  • Norihiko Yamano

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.

Suggested Citation

  • Antoine Dechezleprêtre & Antton Haramboure & Clara Kögel & Guy Lalanne & Norihiko Yamano, 2025. "Carbon Border Adjustments: The potential effects of the EU CBAM along the supply chain," OECD Science, Technology and Industry Working Papers 2025/02, OECD Publishing.
    • Handle: RePEc:oec:stiaaa:2025/02-en
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    More about this item

    Keywords

    Carbon Border Adjustment; Carbon Leakage; Climate Policy; International Trade;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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