16 July 2021


Following the publication of the European Commission’s proposal for establishing a Carbon Border Adjustment Mechanism (CBAM), the UN Conference on Trade and Development (UNCTAD) issued a study on the potential effects of a CBAM on international trade, CO2 emissions, income and employment, with a special focus on developing and vulnerable countries.

The study confirms that the introduction of carbon pricing coupled with a CBAM helps reduce CO2 emissions, inside and outside the EU. International trade patterns change in favour of countries where production is relatively carbon efficient. However, the reduction represents only a small percentage of global CO2 emissions. The introduction of a CBAM results in declines in exports in developing countries in favour of developed countries, which tend to have less carbon intensive production processes.

The UNCTAD suggests that potentially, the EU could consider CBAM flanking policies, including the use of revenue generated by the CBAM, to accelerate the diffusion and uptake of cleaner production technologies to developing country producers. This could be beneficial both in terms of greening the economy and fostering a more inclusive trading system.

Source: UNCTAD