Xavier le Den, Hubert Fallmann, Benjamin Görlach, Roland Ismer, Michael A. Mehling, Karsten Neuhoff, Jan Stede, Jacob Steinmann
Luxembourg: Publications Office of the European Union (2022): 226 pp.
This study, commissioned by the European Commission’s DG TAXUD, evaluates the feasibility of a Carbon Border Adjustment Mechanism (CBAM) for selected sectors to address carbon leakage risks amid the EU’s heightened climate ambitions under the Green Deal, aiming for neutrality by 2050. It outlines intervention logic: mitigating leakage from EU ETS price differentials while ensuring consistent carbon pricing for imports. Five core options are assessed: import CBAM with full auctioning (fixed/actual emissions), complementing free allocation, including exports/products, excise with CBAM and free allocation, and carbon added tax. Analysis covers objectives (GHG reduction, leakage avoidance, international action), practical feasibility, scope (starting with cement, steel, aluminum, fertilizers, polymers), embedded emissions MRV, third-country policy rebates, EU ETS impacts, and costs (EUR 3.95–28.7 million/year). Electricity alternatives are examined separately. Conclusions favor excise (Option 4) for balanced incentives, minimal shuffling risks, and effective leakage protection via phased implementation.
Keywords: Carbon Border Adjustment Mechanism; Carbon Leakage; Embedded Emissions; EU ETS; Sectoral Scope; Trade Impacts