Pulling up the carbon ladder? Decarbonization, dependence, and third-country risks from the European carbon border adjustment mechanism

Since the EU Commission announced the introduction of a carbon border adjustment mechanism (CBAM) within the European Green Deal, debates intensified on its effectiveness for climate action, adhering to WTO regulations, and potential trade wars with China and the US. We argue that the implications of the EU CBAM for affected countries, especially in the Global South, have been underrepresented so far. We assess countries' relative risk levels in two scenarios: i) CBAM addressing only emissions-intensive sectors and ii) CBAM targeting the whole economy. The paper maps relative risks in these two scenarios using a risk index encompassing the export structure of countries, their emissions intensity, emissions reduction targets, and institutional capacities to monitor and report product-based emissions. The quantitative analysis reveals that the impacts of CBAM are distributed unevenly across the globe. The spectrum of impacted nations varies between the two analysed scenarios, but in both cases most countries at relatively high risk are located in Africa. Three qualitative case studies covering Mozambique, Bosnia and Herzegovina, and Morocco evaluate the countries' trade relations, their carbon intensity, energy and climate policies, and institutional capacities, with a special focus on monitoring, reporting and verification (MRV) of carbon emissions. The analysis sheds light on different patterns of vulnerability and policy options to increase resilience.

Automated summary

The EU's introduction of the carbon border adjustment mechanism (CBAM) within the European Green Deal has sparked debates on its effectiveness for climate action, adherence to WTO regulations, and potential trade wars with China and the US. The implications of the EU CBAM for affected countries, especially in the Global South, may have been underestimated, with unevenly distributed impacts across the globe. Most countries at relatively high risk are located in Africa, highlighting the need for differentiated policy responses based on individual countries' vulnerabilities.