Competitiveness and carbon leakage – CBAM

ERCST has built up solid experience on BCAs, carbon leakage issues, and other competitiveness topics in the EU context. After the first iteration of this workstream, in 2021, ERCST will continue its work in:

  1. Part II of the project on Carbon Border Adjustments in the EU
  2. The Economic Impacts of an EU Carbon Border Adjustment Mechanism

Part I of ERCST’s project on Border Carbon Adjustments in the EU was launched in 2019 and aimed at providing analytical input to the discussion on BCAs and to foster an informed debate with domestic and international stakeholders as the CBAM file progressed through the early stages of the legislative process. The concluding Report of the project, entitled “Border Carbon Adjustments in the EU: Issues and Options”[1] was published in 2020.

In 2021, as Part II of the project, ERCST will continue providing: analysis and solutions for addressing carbon leakage and competitiveness issues; independent evaluation of EUs work on the CBAM file; accompany the EUs official stakeholder consultation process by providing a forum for multi-stakeholder engagement.

In line with the above-mentioned objectives, four reports are expected to be published in the coming year: 1) sectoral assessment, 2) CBAM proposal, 3) analysis of the EC’s CBAM proposal, 4) proposal for a framework and pathway for introducing different policy measures to address carbon leakage and competitiveness.

The EU Carbon Border Adjustment Mechanism (CBAM) will undoubtedly have an impact on the relative competitiveness of products covered, hence on trade flows and the economic growth of exporting countries. These impacts have yet to be well understood as many assumptions need to be taken into account.

The objective of this work is to carry out an exercise to estimate the economic costs that an EU CBAM could potentially impose on foreign exporters of selected carbon intensive products (e.g. cement, aluminium, steel) to the EU market.

In 2020, ERCST undertook work to quantify the additional tax burden that an EU CBAM could impose on exporters of steel, aluminium, cement and electricity in the Russian Federation and South Africa. Building on this work, ERCST will carry out in 2021 a similar exercise for an additional set of countries, including but not limited to South East Asian countries.

CONTACTS

Dariusz Dybka (ddybka@ercst.org)

Alexandra Maratou (amaratou@ercst.org)

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