Import charges implemented by the European Union on carbon-intensive products are expected to have ‘a limited impact’ on climate change, new research from the Asian Development Bank (ADB) has found.
The EU’s Carbon Border Adjustment Mechanism (CBAM) will impose import charges on products such as steel, cement, and electricity, based on the carbon dioxide emissions generated in their production.
The CBAM, which will come into effect in 2026, has been developed to tackle ‘carbon leakage’, as production moves to countries with less stringent regulations when it comes to sustainability, or lower costs.
According to ADB, however, it is likely to reduce global carbon emissions by less than 0.2% relative to an emissions trading scheme with a carbon price of €100 per metric tonne and no carbon tariff, statistical modelling shows.
The charge is also likely to reduce global exports to the EU by around 0.4%, ADB suggests, as well as cutting Asia‘s exports to the EU by around 1.1%.
Carbon pricing initiatives
“The fragmented nature of carbon pricing initiatives in terms of sectors and regions covered, including CBAM, can only partially limit carbon leakage,” commented ADB chief economist Albert Park.
“To significantly reduce carbon emissions globally, while also making sure climate efforts are more effective and sustainable, carbon pricing initiatives need to be extended to other regions outside the EU, especially Asia.”
Industry recommendations
The report proposes actions to promote decarbonisation in international trade and global value chains.
Recommendations include implementing specific policies to promote trade in environmentally friendly goods and services, supporting environmental regulations and standards, facilitating the transfer of green technologies, and assisting governments and international institutions in promoting green infrastructure and investments.
Additionally, the report advocates for global collaboration to establish universally-accepted accounting frameworks capable of accurately tracking emissions embedded in products and services.
The findings were included in ADB’s Asian Economic Integration Report (AEIR) 2024 report.
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