The impacts of Carbon Border Adjustment Mechanism (CBAM) on international trade and policy responses: from an economic and environmental equity perspective
Document Type
Research-Article
Journal Name
Energy Policy
Keywords
Carbon Border Adjustment Mechanism (CBAM), Carbon leakage, Carbon pricing, Economic inequality, International trade
Abstract
The European Union (EU) will formally implement the Carbon Border Adjustment Mechanism (CBAM) in 2026. While CBAM aims to protect EU industry competitiveness and mitigate carbon leakage, it will generate a series of trade and environmental equity implications for non-EU countries. Drawing on a global multi-regional input–output (GMRIO) model and a Carbon-Economic Inequality (CEI) Index, this study systematically evaluates CBAM's impact on export competitiveness and carbon–economic inequality in international trade. Using China as a case, it examines the mitigation potential of domestic carbon pricing and trade diversion strategies, as well as their joint effects. Results show that countries like India, Russia, and Turkey will face the sharpest declines in export competitiveness and economic losses. For China, although the impacts remain manageable in the initial stage, export losses rise from 0.78 billion to 11.14 billion euros with CBAM expansion. China's emissions trading system (ETS) helps reduce 30 %–60 % of CBAM-induced export losses, while trade diversion strategies alleviate carbon-economic inequality by adjusting export patterns and promoting high value-added industries. When combined, ETS and trade diversion strategies exhibit synergistic effects. This study provides an analytical framework and empirical evidence to understand CBAM's equity implications and assesses potential policy responses available to export-oriented developing countries. © 2025 Elsevier Ltd