Recommendations for a Just Carbon Border Adjustment Mechanism

The Carbon Border Adjustment Mechanism (CBAM), expected to be launched in October 2023, aims to ensure that European efforts to reduce greenhouse gas emissions do not induce so-called “carbon leakage”. Carbon leakage occurs if companies based in the EU relocate carbon-intensive production to countries with less ambitious climate standards or increase imports of carbon-intensive products to the EU.

The mechanism will require companies importing certain products to the EU to offset embedded greenhouse gas emissions by purchasing CBAM certificates, thus ensuring that the carbon price of imported products is equivalent to that of products made by European producers under the EU Emissions Trading Scheme (ETS). CBAM’s effectiveness and impact will be evaluated by the EU towards the end of its phase-in period.

Economies and sectors dependent on exports to the EU will be more exposed to the mechanism. The policy brief is informed by the views of actors from South Africa, the EU’s largest trading partner in Africa, but its insights are of relevance to issues that will arise more broadly in relation to the CBAM. The researchers identify three key recommendations for European policymakers:

• Strengthen engagement with civil society in vulnerable countries. Participation opportunities for third-country stakeholders should be made accessible and inclusive by addressing the needs of civil society. This includes formal mechanisms within the EU’s institutional structure to facilitate consultations, regional stakeholder evaluation roundtables, and online platforms adapted for target groups to provide information and foster participation.
• Enable targeted impact studies by local researchers. The EU should facilitate country-level studies by local researchers in the Global South on the impacts of the CBAM. This support should include financial resources and technical assistance to better understand the policy implications for trade partners. The studies should inform a science-based and context-dependent evaluation of the mechanism.
• Address and engage with the climate justice implications of the CBAM. EU communications should address CBAM’s expected and observed impacts on trade partners and the implications for climate justice. The mechanism’s distributional impacts should be considered in a special report and measures likely to be effective in mitigating or offsetting disproportionate effects should be integrated into the scheme.

Hermann, J., Weko, S., Marian, A., Apergi, M., Eicke, L. (2023): Creating a Climate-Just Carbon Border Adjustment Mechanism. - RIFS Policy Brief, 2023, 2.