The Impact of EU Carbon Border Adjustment Mechanism: Perspective from Developed and Developing Countries

Abstract

In recent years, the environmental problems which have a direct effect on the daily life and health triggered by human activities are gradually being exposed. Exploring sustainable development becomes the priority. In December 2019, European Union proposed European Union Carbon Border Adjustment Mechanism – Carbon border adjustment levy imposed on some European Union imports, included imported iron and steel, aluminum, fertilizers, and electricity, etc. If this policy is formally implemented, it will inevitably have an impact on the global import and export trade pattern, especially in some major exporters of carbon-intensive products. This paper presents a systematic analysis of the impact of EU CBAM on developed and developing countries. The results show that developed countries are relatively less vulnerable to EU CBAM due to earlier implementation of environmental protection policies and similar carbon pricing levels to the EU. In contrast, poor carbon policy environment and slow development of low-carbon technologies and carbon trading markets is inescapable presences in the developing countries, so the impact is greater. Under the challenge of EU CBAM, it is suggested that all countries accelerate the pace of promoting the construction of carbon emission trading market and a sound carbon pricing system. At the same time, help enterprises to make green transformation and find diversified international trade policies.