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An EU Border Carbon Adjustment Mechanism (CBAM) may bring severe economic consequences to countries without the resources to adapt to a low-carbon paradigm. The EU should therefore consider possible policy risks and involve third-country stakeholders in CBAM policy design; use CBAM revenues to fund decarbonisation in at risk countries; and build emissions reporting requirements around existing international obligations.
Institute for Advanced Sustainability Studies (IASS)
Potsdam, November 2020
The Global Impacts of an EU Carbon
Border Adjustment Mechanism
This policy brief was written by the I ASS researchers Silvia Weko, Laima Eicke, Adela Marian and Maria Apergi.
Special thanks to Andreas G oldthau, Joschka Jahn, Rainer Quitzow, Grace Mbungu, and Anselm Eicke for their
valuable support and feedback.
2_IASS Policy B rief 6/2020
The Global Impact s of an EU Carbo n Border Adjustment Mechanism
This IASS Policy Brief should be cited as: Weko, S., Eicke, L., Marian, A., and Apergi, M.:
The Global Impacts of an EU Carbon Border Adjustment Mechanism, IASS Policy Brief,
November 2020, Potsdam, DOI: 10.2312/iass.2020.055
An EU Border Carbon Adjustment Mechanism (CBAM) may bring severe economic
consequences to countries without the resources to adapt to a low-carbon paradigm.
The EU should therefore consider possible policy risks and involve third-country
stakeholders in CBAM policy design; use CBAM revenues to fund decarbonisation in at-
risk countries; and build emissions reporting requirements around existing international
IASS Policy Brief 6/2020_3
ith the European Green Deal, “Eu-
rope will move forward – alone or
with partners that want to join,
says EU Commission President
von der Leyen. Her key example for the EU becoming
a “global advocate for fairness” is the proposed Car-
bon Border Adjustment Mechanism (CBAM). This
CBAM would counteract carbon leakage – that is, the
relocation of business activities to countr ies with less
ambitious climate policies. This could be done, for
instance, by imposing levies on goods entering the
EU based on their carbon content. The EU’s goal is to
push producers outside Europe to reduce their car-
bon emissions with a policy that is compatible with
World Trade Organization (WTO) rules.
If the CBAM is to become a globally successful tool
for reducing emissions, its implications for countries
in the Global South must be taken into considera-
tion. Under a CBAM, countries with high shares of
carbon-intensive exports to the EU would be ex-
posed to additional costs, which might lead to declin-
ing export shares and deteriorating terms of trade.
Their vulnerability to such changes determines these
countries’ abil ity to adapt to this ri sk. Some countries
will need technological or financial support to decar-
bonise their economy. An additional challenge is the
administrative capacity for sector-specific carbon
accounting in order to prove a low carbon content of
exports. If carbon content cannot be tracked, even
relatively low-carbon producers could see economic
consequences from an EU CBAM.
It is important for the EU to understand the impacts
a CBAM could have on developing countries in par-
ticular, as a policy that shifts the burden to them
violates the spirit of international climate coopera-
tion. This policy brief argues that the EU Commis-
sion under the German Presidency needs to care-
fully craft the CBAM to avoid an uneven transition.
The two key things policymakers should consider
here are the possibility of using CBAM revenues to
mitigate these risks and the complexity of emissions
Recommendation 1:
Consider at-risk countries in CBAM
policy design
A CBAM may give rise to severe,
unintended economic risks due to
additional costs for exporters and
deteriorating terms of trade. Many
countries in the Global South, and on the
African continent in particular, are
exposed to relatively high risks. In order
to avoid new global dividing lines
between countries with a low- and high-
carbon export structure, the EU should
carefully assess risk levels and involve
stakeholders in its CBAM policy design.
Recommendation 2:
Use CBAM revenue to mitigate risks for
vulnerable developing countries
Decarbonisation requires high
infrastructure investments, and many of
the countries facing relatively high risks
from a CBAM are also those most in need
of financial and technical support to
meet their Nationally Determined Contri-
butions (NDCs) to the Paris Agreement.
If a CBAM is to encourage climate action,
the EU will need to provide adequate
resources to support high-risk countries.
Recommendation 3:
Build emissions reporting around
existing international obligations
A CBAM requires the reporting and
verification of carbon emissions, a task
that is already challenging for many
countries. Additional administrative
burdens can be minimised by building on
existing international emissions reporting
obligations. Taking the varying institu-
tional capabilities of dierent countries
into account and supporting capacity
building in this area could also increase
policy acceptance and compliance.
Designing a CBAM that works
for developing countries
A zero-carbon economy by 2050, the ambition set
out in the European Green Deal, will mean massive
struct ural changes for all sectors, including those t hat
were previously given free allowances under the EU
Emissions Trading System (ETS). Higher EU ambi-
tion may increase the costs of production in Europe
for energy-intensive goods, resulting in ‘carbon leak-
age’, the movement of production to less ambitious
regions. In order to address this issue, the EU is dis-
cussing the introduction of a ‘Carbon Border Adjust-
ment Mechanism’ or CBAM.
Cornerstones of CBAM policy
With the Commission due to present its plan in 2021,
the design of the policy is currently up for debate.
Neither the sectoral scope nor the evaluation of car-
bon content has been announced yet. Based on the
Inception Impact Assessment (March 2020), we can
nevertheless expect that a CBAM will at least apply
to imports from energy-intensive, trade-exposed
(EITE) sectors. Indeed, observers have recommend-
ed focusing on EITE sectors, where the most carbon
leakage occurs (Mehling et al. 2019). In addition, pro-
ducers will need to certify carbon content to some
extent. This might involve proving that a product’s
carbon content is lower than an EU benchmark value
or defining the products carbon content (European
Commission 2020, p. 2).
An EU CBAM presents significant challenges, includ-
ing WTO compatibility and the risk that powerful
trading partners might resort to retaliatory trade
measures with negative consequences for the EU
economy. However, a key blind spot in the policy
debate is the impacts this mechanism could have on
vulnerable developing countries. Here, ‘developing
countries’ refers to low-income and lower-middle
income countries rather than major emerging econo-
mies. While such countries (e.g. China, India, or Bra-
zil) will also be impacted by an EU CBAM, they have
greater economic clout to negotiate with the EU and
more resources to adapt. Looking beyond emerging
economies at developing countries is important to
avoid unintended negative side effects such as ad-
verse economic impacts and potential ripple effects
on global climate cooperation.
Two factors determine whether countries are at risk
from an EU CBAM: exposure and vulnerability. Ex-
posure describes how important trade with the EU
is for the national economy. Vulnerability constitutes
an inability to adapt to an EU CBAM by changing ex-
port structures, decarbonising, or certifying the car-
bon content of products.
To assess the relative risk faced by different countries ,
we propose an indicator that combines exposure and
vulnerability and gives equal weight to each. The an-
nex (p. 12) provides more details on the method used
to create the indicator, including data sources and
summary statistics. In what follows, this relative risk
indicator is measured in a country comparison based
on a scenario where the CBAM is applied to imports
from the three EITE sectors aluminium, steel and
Context and current situation
The Global Impact s of an EU Carbo n Border Adjustment Mechanism
4_IASS Policy B rief 6/2020
IASS Policy Brief 6/2020_5
Comparing relative risk
The indicator shows that the emerging economies of
Brazil, China a nd India have a lower relative risk com-
pared to other countries, particularly a number of
countries in Africa. For example, China and Morocco
owe similar shares of their GDP to EITE exports to
the EU, but Morocco is ranked as relatively higher
risk than China due to its lower statistical capacity
and higher carbon intensity. Different levels of rela-
tive risk are illustrated by a more in-depth look at the
exposure and v ulnerability of Vietnam, Mozambique,
Bosnia and Herzegovina, and Morocco. The country
cases, displayed in boxes on the map, show that coun-
tries with similar levels of relative risk may have dif-
ferent vulnerabilities.
Mozambique and Bosnia and Herzegovina both carry
relatively high risks in this scenario, even though they
differ in terms of vulnerability. EITE exports repre-
sent a large share of both countries’ overall exports.
Mozambique’s vulnerability to a CBAM stems from
the challenges posed by measuring and verifying the
carbon content of goods. Bosnia and Herzegovina
has the necessary capacities to track carbon, but un-
der a CBAM its exports would no longer be able to
compete with EU goods due to the country’s high
emissions and current path towards carbon lock-in.
Vietnam has a lower relative risk, since it is not a ma-
jor exporter of EITE goods to the EU, but its carbon
intensity and future emissions trajectory mean that it
could still experience a drop in trade and GDP. Mo-
rocco is an example of a low-risk country, provided
the CBAM is limited to EITE goods, which are not
important for its GDP or trade more generally. How-
ever, the countrys very high carbon intensity would
become problematic if an EU CBAM extends to other
sectors, as overall trade w ith the EU is very import ant
for the Moroccan economy.
Total Relative Risk = Exposure + Vulnerability
Importance of trade with
the EU for economy
Export diversity
Current emissions
Plans to decarbonise
Capacities for emissions
monitoring, reporting,
and verification (MRV)
Percentage of GDP from trade in EITE goods with the EU
EITE goods as a proportion of total exports
Carbon intensity of final energy consumption
Existence of an NDC with emissions reduction targets
National statistical capacities
Risk level
lowest risk
highest risk
6_IASS Policy B rief 6/2020
lowest risk
highest risk
– 4 to 0
Scenario 1
Risk level
Scenario 2
Risk level
lowest risk
highest risk
– 4 to 0
The Global Impact s of an EU Carbo n Border Adjustment Mechanism
Low Exposure
Medium Low Vulnerability
High export diversity
High current emissions
Some pl ans to decar bonise
Medium MRV capacity
EITE ex ports to the E U are around 0 .2 % of GDP
EITE se ctor accou nts for arou nd 1.7 % of total e xports
Carbo n intensit y is above the EU ave rage
(21 gCO2/MJ)
NDC see s emissio ns rising in th e future, bu t plans to
improv e energy effi ciency and s hares of renewable
energ y by 2030
MRV syst ems are bein g developed wi th internati onal
assis tance (only re levant if the co untry dec arbonises )
Morocco: Me dium to low relative risk
Trade in EIT E goods with th e EU is not very i mportant f or the econo my, nor are EITE
goods a ke y export in ge neral. Howe ver, any CBAM beyo nd EITE good s would put the
countr y at very high ris k because of it s carbon int ensity, lac k of MRV capaci ties, and
very hi gh share of GD P from other e xports to th e EU (16 %).
The risk indicator shows a country’s risk
level relative to others. Risk is concep-
tualised as a country’s exposure (how
important trade is for the economy)
and vulnerability (inability to adapt).
In order to facilitate interpretation, the
global map depicts countries’ relative
position in quintiles of the risk indicator.
Mapping EU CBAM Risk
IASS Policy Brief 6/2020_7
Bosnia and Herzegovina
Mozambique High Exposure
High Vulnerability
Low export diversity
Low current emissions
Insuffi cient plans to decarboni se
Low MRV capacity
EITE ex ports to the E U are around 8 .5 % of GDP
EITE se ctor accou nts for 26 % of ex ports
Carbo n intensit y lower than tha t of the EU
(7 gCO2 /MJ) but may i ncrease as d emand grow s,
since 70 % o f the populati on lacks ene rgy acces s
Emiss ions are projected to in crease in N DC
Low statistical capacity, has missed UN reporting
deadlines and indicated need for capacity building
Mozambique: High r elative risk
Trade in EIT E goods with th e EU is very imp ortant fo r the economy, bu t Mozambiqu e
may not be a ble to lower ris k by diversif ying its expo rts. Whi le carbon int ensity is
curre ntly lower tha n in the EU, a lack o f MRV capaci ties would ma ke certify ing a lower
carbo n content (and h ence avoidin g the CBAM) di cult in the sh ort term.
Medium Exposure
Medium Vulnerability
High export diversity
High current emissions
Insuffi cient plans to decarboni se
Medium MRV capacity
EITE ex ports to the E U are around 0 .6 % of GDP
EITE se ctor accou nts for just ove r 5 % of export s
Carbo n intensit y is above the EU ave rage
(16 gCO2/MJ)
No emis sions redu ction targ ets in NDC; p lans to
incre ase share of r enewable en ergy to 6 % by 2030
Above- average stat istical cap acity, no sec tor-
speci c rep orting to the U N although p reparing
to do so
Vietnam: Medium relative risk
Trade in EIT E goods is imp ortant fo r the economy b ut is likely to fa ll sharply i n the
event of a C BAM given the c ountry’s e missions -intensi ve energy sys tem, which is not
on trac k to decarbon ise soon. Eve n if certain g oods have a lowe r carbon content and
would no t necessar ily be subje ct to a CBAM, t he capaciti es to track thi s are not yet
in plac e.
High Exposure
High Vulnerability
Very low ex port diver sity
High current emissions
Insuffi cient plans to decarboni se
High MRV capacity
EITE ex ports to the E U are around 5 .2 % of GDP
EITE se ctor accou nts for 44 % of ex ports
Carbo n intensit y is above the EU ave rage
(23 gCO2/MJ)
Plans t o hit peak emi ssions in 20 30; large l ignite
reserves make rapid decarbonisation unlikely
High statistical capacity, UN reports include
sector- specifi c emissio ns and the cou ntry rece ives
MRV sup port
Bosni a and Herzeg ovina: Hig h relative ris k
Trade in EIT E goods with th e EU is very imp ortant fo r the economy; E ITE goods
accou nt for almost h alf of all natio nal expor ts. Diversifi ca tion of expor ts is theref ore
not fea sible in the sh ort to mediu m term. The co untry has th e MRV capaci ties to
repor t sector-s pecifi c emissions , but given it s high carbon i ntensity a nd lack of pla ns
to deca rbonise, th e relative CB AM risk rema ins high.
The Global Impact s of an EU Carbo n Border Adjustment Mechanism
8_ IASS Policy Brief 6/2020
If the EU aims to advance global climate action, it
must ensure that its CBAM really does incentivise
decarbonisation without inducing economic hard-
ship in those countries where exports to Europe are
important, but adaptive capacities are limited. When
deciding on the policy design, the EU needs to take
account of the risks facing especially vulnerable de-
veloping countries and involve stakeholders from at-
risk countries in CBAM policy discussions.
To date, policy debates have mainly considered how a
CBAM could be made WTO-compatible and wheth-
er there are risks of trade retal iation. Discussions with
stakeholders from non-EU countries about CBAM
risks have tended to concentrate on large industrial-
ised countries (see, for example, Marcu et al. 2020).
However, this focus on emerging economies fails to
recognise that low-income and lower-middle income
countries may be sim ilarly exposed, and more vulner-
able. The fact that many of these at-risk countries are
on the African continent also raises questions about
climate and energy justice that the EU cannot afford
to overlook.
Moreover, rather than incentivising decarbonisation
in these countries, a CBAM may actually limit their
trade options. This is because many vulnerable de-
veloping countries have indicated in their NDCs that
they do not have the financial and technical resources
necessary to decarbonise (see Pauw et al. 2020). Giv-
en this lack of resources, the possibilities of reacting
to a CBAM by decarbonising are too limited to avoid
losing significant shares of their GDP. Future multi-
lateral cooperation on both trade and climate issues
could be adversely affected if a CBAM is perceived as
a protectionist measure that violates the principle of
common but differentiated responsibility.
Listening to at-risk stakeholders
Involving stakeholders from vulnerable developing
countries in CBAM design ensures that the concerns
of these actors are heard. A step in the CBAM con-
sultation process where comments are invited from
these stakeholders could help to head off conflicts
that might arise in other arenas like the WTO or UN-
FCCC (United Nations Framework Convention on
Climate Change). The upcoming COP is an oppor-
tunity for the EU to signal its intent and gather gen-
eral feedback. A targeted event with at-risk countries
would also be necessary to discuss specific vulner-
abilities and needs and how these could be addressed
without watering down the ambition to prevent car-
bon leakage.
A positive knock-on effect of these discussions is that
they can strengthen the domestic positions of actors
arguing against carbon lock-in at home. While the
EU is likely to see a backlash from actors with fossil
interests in the context of such consultations, this is
an inevitable consequence of implementing a CBAM
and should not be given the same weight as concerns
about structural change.
Consider at-risk countries
in CBAM policy design
Use CBAM revenue to mitigate
risks for developing countries
Given the already significant finance gap, we suggest
that some of the revenues generated by an EU CBAM
are reinvested to support decarbonisation processes
in developing countries. Since decarbonisation meas-
ures are particularly rare in emissions-intensive sec-
tors, these sectors should be specifically targeted.
This effort can be linked to the current EU climate
finance architecture, which includes a range of sourc-
es (public and private, bilateral and multilateral) for
transferring money to developing countries.
It has been suggested that revenues raised by the
CBAM should flow into the EU budget, especially
given the need to finance the Covid-19 recovery (see
Marcu et al. 2020). However, this would violate the
principle of common but differentiated responsibil-
ity, which puts the onus on industrialised nations to
transfer climate finance to developing countries.
The benefits of financial transfers
Transferring at least part of the CBAM funds to de-
veloping countries will have a number of significant
benefits: increasing resilience, CBAM acceptance,
and the EU’s overall contributions to climate finance.
Financial transfers will enhance the resilience of de-
veloping countries and reduce climate policy risks
from a CBAM. So far, countries have not been able
to raise sustainable additional finance at the required
levels to effectively address climate change mitigation
(Schalatek 2019; CPI 2019). It is particularly hard for
mitigation finance to reach low-income and lower-
middle income countries due to regulatory and insti-
tutional barriers that increase investment risks (e.g.
political risks, currency risks, regulatory and policy
risks) and raise the cost of capital (Brown and Jacobs
2011). Public climate finance can help reduce these
risks by providing direct investments, risk mitigation
instruments, and support for policy design.
In addition, financial transfers can help to increase
CBAM acceptance. Redirecting CBAM revenues
back to more vulnerable and exposed countries can
bolster international support for an EU CBAM, in
the same way that climate finance in general can help
secure global agreement on the need to fight climate
Finally, using CBAM revenues for climate finance
will boost the EU’s contributions to international
mitigation efforts. Directing funds collected through
a CBAM to climate finance has the advantage of in-
creasing financial flows and at the same time making
them more predictable. It can also help expedite the
process of disbursements, which is often long and bu-
CBAM revenues can either be transferred directly to
an existing fund such as the Green Climate Fund, or
a new fund can be created for that purpose. As for the
selection criteria that determine which countries will
receive funds, general climate finance rules can apply,
but additional criteria that reflect exposure and vul-
nerability to CBAM should be added. Transparency,
accountability and country ownership will need to be
simultaneously strengthened in order to increase the
impact of these financial transfers.
IASS Policy Brief 6/2020_9
The Global Impact s of an EU Carbo n Border Adjustment Mechanism
10_ IASS Policy Brief 6/2020
Discussions about how carbon content should be
measured and reported are ongoing, but regardless
of the shape these obligations take, an EU CBAM w ill
require emissions reporting on a large scale, which
might prove challenging for many countries. In or-
der to minimise the administrative load associated
with tracking carbon content, emissions reporting
requirements for the EU CBAM need to build initial ly
on existing international emissions reporting obliga-
tions, for instance within the UNFCCC.
The country case studies reveal a broad spectrum of
capacities to monitor, report, and verify (MRV) car-
bon emissions and, in particular, sectoral emissions.
For example, while Bosnia has provided detailed in-
formation on sector-specific EITE emissions in the
relevant biannual UNFCCC update reports, Mo-
zambique has failed to submit any information on its
emissions (UNFCCC 2020). Only a few countries
specifically target emission reductions in the EITE
sector. One of these is Morocco, which identified ce-
ment production and phosphate processing as tar-
get areas for achieving emissions mitigation. Even
in countries with relatively high statistical capacity,
such as Morocco and Vietnam, MRV systems for sec-
tor-specific emissions are not yet in place. Without
such MRV capacities, countries with a high share of
EITE exports to Europe – such as Mozambique – may
be particularly vulnerable even though their energy
system as a whole is lower-carbon than that of the EU.
Many countries have recognised the challenge posed
by sector-specific emissions reporting and have high-
lighted the need for mitigation finance, technology
transfer, and capacity building in order to achieve,
measure and report their NDC targets. Internation-
al initiatives such as the NDC Partnership and the
Transparency Partnership are already supporting
many countries with the task of fulfilling their MRV
requirements. As part of the financial assistance to
reduce countries’ vulnerability, CBAM revenue could
be utilised to fund support schemes for the develop-
ment or reinforcement of institutional capacities re-
lated to the MRV of sector-specific emissions. This
would strengthen ongoing efforts and alleviate the
burden on vulnerable countries.
Currently, developing countries have different re-
porting requirements under the UNFCCC than de-
veloped countries with regard to update periods and
detail level. In order to increase policy acceptance
and compliance with the emissions reporting obli-
gations for the CBAM, the EU should also consider
differentiating between countries with varying insti-
tutional capacities. If the EU does indeed use CBAM
revenue to support MRV capacities in vulnerable
countries, the requirements for reporting could be
increased over time as these capacities are developed.
In the longer term, exemptions from stricter report-
ing standards granted to vulnerable countries would
need to be periodically re-assessed.
Build emissions reporting around
existing international obligations
Conclusion and Outlook
The Carbon Border Adjustment Mechanism foreseen
in the European Green Deal aims not only to position
the EU as a frontrunner in the global energy transi-
tion, but also to create a level playing field for industri-
al competition. Ideally, it will lead to a self-reinforcing
cycle to raise climate ambition worldwide. Taking into
account the potential economic risks arising from a
CBAM for countries in the Global South may help to
avoid retaliatory measures and new global dividing
lines between low- and high-carbon producers. In
order to combat climate change, broad alliances for
ambition will be needed in the long term.
This Policy Brief highlights the different levels of
exposure and vulnerability that apply to different
countries if energy-intensive, trade-exposed goods
become subject to an EU CBAM. It reveals that policy
risk levels are distributed unevenly across the globe,
and that many high-risk countries may require finan-
cial and technica l support in order to decarbonise and
cope with a CBAM. Therefore, the EU would be well
advised to use the revenues generated by CBAM to
support those countries in their decarbonisation pro-
cesses. Furthermore, administrative burdens could
be reduced by building on existing emissions report-
ing obligations and strengthening reporting capaci-
ties. Incorporating t hese elements into the CBAM de-
sign may increase policy acceptance and compliance.
The concrete policy design of the EU CBAM is still
under discussion, with the EU Commission due to
present its plan in 2021. Debates on its implications
should focus not only on EU countries and influential
trading partners like the USA or Russia, but also on
developing countries that face important economic
risks from such an instrument. This innovative, yet
unilateral policy needs to reflect the unequal distri-
bution of risks in order to maintain and reinforce al-
liances to combat climate change.
IASS Policy Brief 6/2020_11
The Global Impact s of an EU Carbo n Border Adjustment Mechanism
12_ IASS Policy Brief 6/2020
The Risk Indicator
Sectoral_Exports_GDP + 0.25×(RelativeExports_Sectoral +
LowStatisticalCapacity + CarbonIntensity_FinalEnergyConsumption +
– 0.034
– 1.3
Description of the relevant variables
Variable name
Variable defi nition
Exports of cement, steel and alumi-
nium to the EU as a proportion of a
country’s GDP
Exports of cement, steel and alumi-
nium as a proportion of a country’s
total exports
100 – statistical system and the
quality of data (score measured in
Carbon Intensity of Total Final Energy
Consumption of a country’s Carbon
Emissions (gCO2/yr) divided by its
Total Final Energy Consumption (MJ).
Binary variable coded as 0 or 1 based
on the existence of emission reduc-
tions targets in a country’s Nationally
Determined Contributions. 1 indicates
no emission reductions targets.
0 indicates emission reduction targets
have been set.
United Nations
World Bank
Carbon Emissions
(World Bank
2020), Total
Final Energy
Consumption 2017
(U.S. EIA 2020)
Pauw et al 2020
The standardised values of all relevant variables were used in the formula .
References and further reading
Brown, J. and Jacobs, M., 2011. Leveraging private investment: the role of public sector climate finance,
Overseas Development Institute Background Note, April 2011
Climate Policy Initiative (CPI), 2019. Global Landscape of Climate Finance 2019. [Barbara Buchner,
Alex Clark, Angela Falconer, Rob Macquarie, Chavi Meattle, Rowena Tolentino, Cooper Wetherbee]. Available
European Commission, 2020. Inception Impact Assessment: carbon border adjustment mechanism.
Available at:
Marcu, A., Mehling, A., and Cosbey, A., (2020). “Border Carbon Adjustments in the EU: Issues and
Options”. ERCST Roundtable on Climate Change and Sustainable Transition. Available at:
Mehling, M., Van Asselt, H., Das, K., Droege, S., and Verkuijl, C., (2019). Designing border carbon
adjustments for enhanced climate action. American Journal of International Law, 113, 433 – 481.
Pauw, W.P, Cassanmagnano, D., Mbeva, K., Hein, J., Guarin, A., Brandi, C., Dzebo, A.,
Canales, N., Adams, K.M., Atteridge, A., Bock, T., Helms, J., Zalewski, A., Frommé. E.,
Lindener, A., Muhammad, D., (2020). NDC Explorer [Online]. German Development Institute, African
Centre for Technology Studies (ACTS), Stockholm Environment Institute (SEI). Updated 18 March, available
online at:
Schalatek, L., (2019). The Principles and Criteria of Public Climate Finance - A Normative Framework,
Heinrich Böll Stiftung Washington, DC., November 2019
United Nations, (2020). Comtrade database. Available at:
UNFCCC, (2020). Biennial Update Report submissions from Non-Annex I parties [Online]. Available at:
U.S. Energy Information Administration (EIA), 2020. Total Final Energy Consumption by country.
Available at:
World Bank, (2020). World Development Indicators (WDI). Available at:
IASS Policy Brief 6/2020_13
The Global Impact s of an EU Carbo n Border Adjustment Mechanism
14_ IASS Polic y Brief 6/2020
About the authors
Silvia Weko is a research associate for the project Investi-
gating the Systemic Impacts of the Global Energy Transition
(ISIGET). She holds a Master's degree in Sociology from the
Freie Universität Berlin, and a bachelor's degree in Interna-
tional Studies from Juniata College. During her studies she
worked for the Heinrich Böll Foundation on their global
Energiewende project and was responsible for communi-
cating the benefi ts of the energy transition to an international
audience. As a freelance energy expert, she created the
Energiewende Wiki for the Böll Foundation, performed
quantitative research on transportation and emissions, and
took part in expert dialogues on European energy and
regional development.
Laima Eicke is a research associate for the project Investi-
gating the Systemic Impacts of the Global Energy Transi-
tion (ISIGET). Her work focuses on the international political
economy of the global energy transition, and she specialises
in energy transition fi nance and the Global South. Before she
came to the IASS, Eicke worked for the German Agency
for International Cooperation (GIZ), where she supported
governments in the implementation of the Paris Agreement.
Before that, Eicke worked at several research institutes,
federal ministries, NGOs and consultancies. She studied
International Relations and Socio-ecological Economics and
Policy at Vienna University of Business and Economics, the
TU Dresden, and in Buenos Aires and Lisbon.
© IASS; L . Osterman n
© IASS; L . Osterman n
IASS Policy Brief 6/2020_15
Adela Marian is a Senior Research Associate with the Path-
ways to Sustainable Energy team at the IASS. Her work
centres on topics related to the energy system, and her
current research interests include renewable energy auctions
in India as well as the implications of an emerging hydrogen
economy for the global energy transition. From 2015 to 2018,
she was responsible for the scientifi c coordination of the
demonstration area Demo 5 within the European project Best
Paths, which resulted in the fi rst validation of a 3-gigawatt-
class superconducting cable system. Prior to joining the IASS,
Adela Marian conducted basic research at the Fritz Haber
Institute of the Max Planck Society in Berlin. She holds a PhD
in Physics from the University of Colorado at Boulder, USA
and is a recipient of an Alexander von Humboldt Fellowship
and a Marie Curie Fellowship.
Maria Apergi is a scientifi c project leader for the ISIGET
project, which focuses on the impacts of the clean energy
transition on countries of the Global South. She holds a PhD
in Environmental Policy and Development from the London
School of Economics and Political Science (LSE). Her doctor-
al research focused on applications of off -grid solar energy in
Guinea-Bissau, where she studied households' energy adop-
tion choices and energy use patterns. She also holds an MSc
in Environmental Policy and Regulation from LSE, an MSc in
International Aff airs from Columbia University, and a BSc in
Economics from the University of Athens. In addition, she has
worked as an energy analyst for the private sector and as an
independent consultant in a number of projects. This includes
her work with the Overseas Development Institute, where she
has worked on projects related to climate fi nance, energy
access, green growth, and disaster risk management.
© IASS; L . Osterman n
© private
IASS Policy Brief 6/2020
November 2020
Institute for Advanced Sustainability Studies (IASS) e. V.
Berliner Straße 130
14467 Potsdam
Tel: +49 (0) 331-28822-300
Fax: +49 (0) 331-28822-310
Managing Scientifi c Director:
Prof. Ortwin Renn,
authorised to represent the institute
Editing: Anne Boden and Matthias Tang
DOI: 10.2312/iass.2020.055
ISSN: 2196-9221
Institute for Advanced Sustainability Studies (IASS) e. V.
The Institute for Advanced Sustainability Studies (IASS) conducts research with
the goal of identifying, advancing, and guiding transformation processes towards
sustainable societies in Germany and abroad. Its research practice is transdisciplinary,
transformative, and co-creative. The institute cooperates with partners in academia,
political institutions, administrations, civil society, and the business community to
understand sustainability challenges and generate potential solutions. A strong
network of national and international partners supports the work of the institute.
Among its central research topics are the energy transition, emerging technologies,
climate change, air quality, systemic risks, governance and participation, and cultures
of transformation. The IASS is funded by the research ministries of the Federal
Government of Germany and the State of Brandenburg.
... nsibility and respected capabilities. Indeed, while big economies such as the US or China have the power and resources to retaliate or even rather quickly adjust to the CBAM by pursuing the decarbonization of their industries, small low-and mediumincome countries have often limited capabilities for both and thus might be disproportionally affected (Weko et. al., 2020). Ex-ante modelling supports this concern by predicting that a CBAM would shift the economic costs of decarbonization to the developing world (Böhringer et al., 2018). ...
... Ukraine could be significantly affected by the EU CBAM and is among the countries whose governments have raised deep concerns. Researchers name Ukraine among the countries under the highest relative risk from the EU CBAM (Weko et al., 2020) and envisage a "modest" CBAM-related per capita income loss in Ukraine of 0.4 % (Chepeliev, 2021). Ukraine actively pursues integration with the EU in the framework of the EU-Ukraine Association Agreement (AA) and has a number of obligations to align with the EU acquis, including in the area of climate policy. ...
... The lack of attention to the effects that a CBAM might have on vulnerable developing countries was called "a key blind spot in the [CBAM] policy debate" (Weko et al., 2020, p. 4). While big economies have greater economic power to negotiate with the EU and resources to adapt, developing countries might be adversely affected by a CBAM as they have much lower ability to adapt by changing their export structures and decarbonizing (Weko et al., 2020). Finally, trade partners have stressed the importance of a transparent dialogue, saying the latter had not yet taken place to a sufficient degree (Marcu et al., 2020). ...
Full-text available
The purpose of this study is to examine if and how the EU CBAM influences the climate policy debate in Ukraine, one of the countries that is expected to be most affected due to its large share of carbon-intensive exports to the EU. The study seeks to find out how the EU CBAM can be made more instrumental in promoting an increase in the country's climate policy ambition.
... By focusing on Australian H 2 exports into the EU and H 2 German imports, our research makes a novel contribution to the field. Other research has focused on the impact of the CBAM on middle-income and developing countries rather than high income countries like Australia and Germany [17]; the impact on developing third countries (proposing an indicator that combines exposure and vulnerability, but not as comprehensive of our framework) [18]; specific country impacts (for example, Ukraine) [19]; CBAM impacts on Australian agriculture [20]; the CBAM's environmental effectiveness [21]; and CBAM's impact on carbon leakage [1]. Muller et al.'s review of CBAM-like mechanisms was written prior to the European Commission's CBAM release in July 2021 [22]. ...
Full-text available
Hydrogen is fast becoming a new international “super fuel” to accelerate global climate change ambitions. This paper has two inter-weaving themes. Contextually, it focuses on the potential impact of the EU’s new Carbon Border Adjustment Mechanism (CBAM) on fossil fuel-generated as opposed to green hydrogen imports. The CBAM, as a transnational carbon adjustment mechanism, has the potential to impact international trade in energy. It seeks both a level playing field between imports and EU internal markets (subject to ambitious EU climate change policies), and to encourage emissions reduction laggards through its “carbon diplomacy”. Countries without a price on carbon will be charged for embodied carbon in their supply chains when they export to the EU. Empirically, we focus on two hydrogen export/import case studies: Australia as a non-EU state with ambitions to export hydrogen, and Germany as an EU Member State reliant on energy imports. Energy security is central to energy trade debates but needs to be conceptualized beyond supply and demand economics to include geopolitics, just transitions and the impacts of border carbon taxes and EU carbon diplomacy. Accordingly, we apply and further develop a seven-dimension energy security-justice framework to the examples of brown, blue and green hydrogen export/import hydrogen operations, with varying carbon-intensity supply chains, in Australia and Germany. Applying the framework, we identify potential impact—risks and opportunities—associated with identified brown, blue and green hydrogen export/import projects in the two countries. This research contributes to the emerging fields of international hydrogen trade, supply chains, and international carbon diplomacy and develops a potentially useful seven-dimension energy security-justice framework for energy researchers and policy analysts.
... But given that their economies tend to be relatively carbon-intensive, a CBAM could make their export products less competitive, with potentially severe consequences for their domestic economies and people's livelihoods. As estimates show, 104 countries in northern Africa, the Balkans, and the former Soviet Union would be significantly affected by a CBAM. With few alternative trading options and slow decarbonization pathways, these states are highly vulnerable to this type of trade-related EU climate action. ...
Full-text available
Andreas Goldthau charts how the EU has progressively incorporated climate factors into its external economic relations but has not done so in a way that constitutes an effective approach to geoeconomics. While the EU’s regulatory toolbox is core to its international power, whether it can be used to manage the strategic impacts of climate change without significant negative side effects is unclear.
Uneven access to low carbon finance and technology may give rise to energy transition frontrunners and laggards. This article offers a first conceptualization of the risks of an uneven energy transition and its implications for the international political economy and corroborates those with an empirical investigation of elite risk perceptions in the energy industry and finance sector. The multi-method approach combines descriptive survey data with a multinomial logistic regression testing for different expert risk perceptions between sectors, complemented by a set of qualitative interviews. The findings suggest that uneven transition patterns increase the risks of economic instability and decrease the competitiveness of ‘late decarbonizers’. Feedback cycles might impede the latter to catch up, with potentially severe consequences for global equity and international tensions. Countries particularly in the Global South are exposed to higher transition risks than technology-leading economies of the Global North. With this, the paper highlights the importance of relative timing for the implementation of energy transition policies.
Full-text available
It is therefore a priority to engage in a more open dialogue with non-EU partners, focusing on four themes: Understanding and responding to the vulnerability of Europe’s trading partners, distinguishing between the real vulnerability of some Least Developed Countries (LDCs) in particular, and the political risk of an argument being used as a rallying cry. Scope of the adjustment mechanism: in relation to the previous point, short and medium-term objectives must be clarified, bearing in mind that the EU’s internal promises, if poorly managed, can undermine diplomatic efforts. Potential attractiveness of an adjustment mechanism for partners that develop domestic carbon pricing: here the priority should be given to bilateral trade in the first instance, particularly with the United States and China; and at the same time the EU could be clearer in its advocacy of such an approach in international fora. The broader perspective from which countries or regions perceive the proposed adjustment mechanism.
Full-text available
As part of the European Green Deal (EGD), the European Commission is currently elaborating a legislative proposal for a Carbon Border Adjustment Mechanism (CBAM) to prevent greenhouse gas emissions leakage and level the playing field between European and foreign emitters. This report brings together the main takeaways from the project ‘Border Carbon Adjustments (BCAs) in the EU: Issues and Options’ launched in November 2019 to provide analytical input and foster an informed debate with domestic and international stakeholders as the CBAM file progresses through the early stages of the legislative process. Drawing on extensive feedback obtained in a series of stakeholder consultations, the report offers a detailed analysis of the building blocks of BCAs as a policy option in the European context, discusses alternative policy options, and considers different combinations of policy instruments to achieve the desired outcomes.
The Paris Agreement advances a heterogeneous approach to international climate cooperation. Such an approach may be undermined by carbon leakage—the displacement of emissions from states with more to less stringent climate policy constraints. Border carbon adjustments offer a promising response to leakage, but they also raise concerns about their compatibility with international trade law. This Article provides a comprehensive analysis of border carbon adjustments and proposes a way to design them that balances legal, administrative, and environmental considerations.
Leveraging private investment: the role of public sector climate finance
  • J Brown
  • M Jacobs
Brown, J. and Jacobs, M., 2011. Leveraging private investment: the role of public sector climate finance, Overseas Development Institute Background Note, April 2011
African Centre for Technology Studies (ACTS)
  • German Development Institute
German Development Institute, African Centre for Technology Studies (ACTS), Stockholm Environment Institute (SEI). Updated 18 March, available online at:
The Principles and Criteria of Public Climate Finance -A Normative Framework
  • L Schalatek
Schalatek, L., (2019). The Principles and Criteria of Public Climate Finance -A Normative Framework, Heinrich Böll Stiftung Washington, DC., November 2019
Biennial Update Report submissions from Non-Annex I parties
UNFCCC, (2020). Biennial Update Report submissions from Non-Annex I parties [Online]. Available at:
Managing Scientifi c Director: Prof. Ortwin Renn, authorised to represent the institute Editing: Anne Boden and Matthias Tang
Managing Scientifi c Director: Prof. Ortwin Renn, authorised to represent the institute Editing: Anne Boden and Matthias Tang DOI: 10.2312/iass.2020.055 ISSN: 2196-9221