Global Effects of Carbon Border Adjustment Mechanisms

The National Bureau of Economic Research (NBER) published a working paper analyzing the impact of Carbon Border Adjustment Mechanisms (CBAMs).

• CBAMs are being implemented by the European Union and the United Kingdom, targeting emissions-intensive and heavily traded sectors like aluminum and steel production.
• The mechanisms aim to boost domestic competitiveness, reduce emissions leakage, and encourage carbon taxation globally.
• The study uses a quantitative equilibrium model and plant-level data worldwide to assess impacts.
• CBAM can avoid disproportionate negative impacts on lower-income trading partners while achieving environmental and economic goals.

This study provides evidence on the effectiveness of CBAMs for regulating carbon emissions in international trade and supporting global climate regulation efforts.