EU carbon border levy could hurt Asian developing countries, yet do little to cut emissions: ADB

(Eco Business, 27 Feb 2024) India’s key export industries such as steel could be hit by the EU’s Carbon Border Adjustment Mechanism, which are designed to make sure Europe’s decarbonisation efforts are not undermined by trade partners with weaker pollution standards.

A European Union plan to tax carbon dioxide emissions beyond its borders will hamper exports from Asia, with India and the wider South Asia region bearing the brunt of the impact, according to a new Asian Development Bank (ADB) study. 

The transnational tariff, officially known as the Carbon Border Adjustment Mechanism (CBAM), is also unlikely to lead to big reductions in greenhouse gas emissions, said the multilateral bank. 

Estimates shown through statistical modelling indicate that global carbon emissions will likely bring about an immediate fall of less than 0.2 per cent with the CBAM, relative to a scenario when only an emissions trading scheme (ETS) with a carbon price of 100 euros (US$108) is in place, an impact that researchers have described as “modest” and “very marginal”. 

This is especially due to the fragmented nature of carbon pricing initiatives in terms of sectors and regions covered, said the annual ADB report on economic integration. The study takes a closer look at global value chain decarbonisation this year, and calls for extending the CBAM to other regions, especially Asia. 

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Eco Business, 27 Feb 2024: EU carbon border levy could hurt Asian developing countries, yet do little to cut emissions: ADB