Wahyu Dwi Anggoro
IDXChannel - European Union (EU) import charges on carbon-intensive products are expected to have a modest negative effect on economies in Asia and the Pacific and limited impact on climate change, according to research by the Asian Development Bank (ADB).
The EU’s Carbon Border Adjustment Mechanism (CBAM), set to go into force in 2026, is likely to reduce global carbon emissions by less than 0.2% relative to an emissions trading scheme with a carbon price of EUR100 per metric ton and no carbon tariff, statistical modeling shows. At the same time, the charges may reduce global exports to the EU by around 0.4% and Asia’s exports to the EU by around 1.1%, while negatively affecting the output of some manufacturers within the EU, according to the Asian Economic Integration Report (AEIR) 2024, released today.
CBAM will impose import charges on products such as steel, cement, and electricity, based on the carbon dioxide emissions embedded in their production. The charges are aimed at curbing “carbon leakage,” the result of polluters moving production from countries with stringent regulations or high carbon prices to those with less stringent regulations or lower prices.
“The fragmented nature of carbon pricing initiatives in terms of sectors and regions covered, including CBAM, can only partially limit carbon leakage,” said ADB Chief Economist Albert Park in a media release.
“To significantly reduce carbon emissions globally, while also making sure climate efforts are more effective and sustainable, carbon pricing initiatives need to be extended to other regions outside the EU, especially Asia," Park added.
