The European carbon border adjustment mechanism : a small step in the right direction

Title data

Korpar, Niko ; Larch, Mario ; Stöllinger, Roman:
The European carbon border adjustment mechanism : a small step in the right direction.
In: International Economics and Economic Policy. Vol. 20 (2023) Issue 1 . - pp. 95-138.
ISSN 1612-4812
DOI: https://doi.org/10.1007/s10368-022-00550-9

Official URL:

Abstract in another language

We estimate the effects of a European Carbon Border Adjustment (CBA) mechanism on exports, real GDP, welfare and emissions using the multi-region, multi-sector structural gravity model of Larch and Wanner (2017). Incorporating the main industries covered in the proposal of the European Commission from mid-2021, as well as its other design features, and assuming prevailing CO2 prices, we find only small effects of the European CBA mechanism. EU exports are estimated to decline by 0.04%, while CO2 emissions in EU countries increase by 0.24%. These negligible results mask larger adjustments at the sectoral level. The structural changes will shift the EU economy towards more emission-intensive industries, which will make achieving its climate goals harder. On the positive side, the European CBA mechanism will reduce global emissions by 0.08%. Given the minute economic costs in terms of GDP and welfare losses, the CBA mechanism seems an appropriate policy tool, though its proposed design will not be able to make a significant contribution to mitigating global climate change.

Further data

Item Type:	Article in a journal
Refereed:	Yes
Keywords:	Carbon border taxes; Carbon tariffs; Carbon leakage; Climate change
Institutions of the University:	Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VI: Empirical Economic Research > Chair Economics VI: Empirical Economic Research - Univ.-Prof. Dr. Mario Larch Faculties Faculties > Faculty of Law, Business and Economics Faculties > Faculty of Law, Business and Economics > Department of Economics Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VI: Empirical Economic Research
Result of work at the UBT:	Yes
DDC Subjects:	300 Social sciences > 330 Economics
Date Deposited:	13 May 2023 21:00
Last Modified:	15 May 2023 05:53
URI:	https://eref.uni-bayreuth.de/id/eprint/76434