Impact Assessment of CBAM in 30 Countries

The Project at A Glance

Carbon border adjustment mechanisms (CBAMs) are a form of applied tariff on imports whereby importers must bear regulatory costs equivalent to those incurred by domestic producers concerning carbon emissions. The implementation of the CBAM by the EU might potentially adversely affect the exports of products related to high carbon emissions to the EU for the LDCs and SIDS.

International Economics (IEC) conducted research to assess the ex-ante effects of the CBAM in 30 most potentially impacted countries. The assignment was part of the EU Global Support Facility for Nationally Determined Contributions (NDCs), which was funded by the European Commission.

What We Found

The objective of the assignment is to assess the impact of four products, namely chemical fertilisers, iron-steel, cement, aluminium, of the CBAM on Department for Neighbourhood and Enlargement Negotiations (NEAR) and Department for International Partnerships (INTPA) partner countries and deep dive into a list of the most affected countries. Our Team provided support which focused on developing the Country Snapshots and Ex-ante Impact Analysis of CBAM effects in the most potentially impacted countries.

The outcome of this assignment will contribute to the preliminary recommendations and information for validation in the next phase to refine the policy actions to support impact mitigation in the studied countries. For example, the findings of the CGE modelling will indicate the impact of CBAM on welfare, trade, output across sectors, and changes in skilled/unskilled wages, whereas preliminary recommendations for mitigation support can be made based on the findings of the Country Snapshots.

Our Strategy and Impact

The team conducted an in-depth critical review of past studies on CBAM to propose a methodology and indicators to quantify the impact of CBAM in LDCs and SIDs. Individual studies for LDCs and SIDs, which exported aluminium, iron/steel, cement, or chemical fertilizers and which were exposed to CBAM, were developed. These studies were enhanced through engagement with national stakeholders and leadership of key business associations and firms from the tagged sectors.

Our Core Solutions

The cross-cutting nature of trade is such that it requires a comprehensive, integrated, and inclusive framework. While well-designed trade policies are vital to delivering long-term benefits for economies, so is the need for effective implementation.

At International Economics Consulting Ltd., we support the public and private sectors in navigating the policy and negotiation landscape regarding international trade. This includes establishing robust monitoring and evaluation framework through sophisticated real-time dashboards and reporting systems to ensure the best outcomes. We provide advocacy services to empower delegations and negotiators to participate effectively in trade negotiations and deliberations and advocate for their countries’ interests and positions.