Review of Carbon Leakage Risks of CBAM Export Goods

The European Roundtable on Climate Change and Sustainable Transition (ERCST), an independent think-tank based in Brussels, published a report on CBAM regulation: “Review of Carbon Leakage Risks of CBAM Export Goods”.

The transitional phase of the Carbon Border Adjustment Mechanism (CBAM) is underway, but several unresolved issues persist ahead of the definitive period. One of the issues is the question of exports, particularly within the context of the review under the EU Emissions Trading System (ETS) legislation. This report addresses the carbon leakage risk associated with goods subject to CBAM and manufactured in the EU for export.

Exports play a vital economic and environmental role for goods in the EU covered by the CBAM, the role depends not only on the share of production that is exported, but other factors such as capacity utilization levels, seasonality, and cyclical demand.

European producers also face tough competition in export markets due to factors like high input costs, excess production capacities, and aggressive interventions by trade partners.

The CBAM, while addressing carbon leakage within the EU, currently lacks provisions to protect EU exports, posing a risk to a significant segment of the EU industry.

The mandated review of carbon leakage risk should be dynamic and forward-looking and consider each sector’s specific circumstances in relation to exports.

For more information, please see here.