Overview
As the EU increases its climate ambitions, there is a risk that
its emissions reduction efforts are offset by increased emissions
outside the EU from industries transferring their productive
activities to countries where climate change policies are less
stringent (‘Carbon Leakage'). Carbon Leakage would
undermine the effectiveness of the EU's emission mitigation
policies, and might lead to an increase in total emissions
globally.
This note seeks to discuss the implementation challenges to a
carbon border adjustment mechanism (CBAM) and the expected trading
consequences that may transpire, including under the World Trade
Organization's (WTO) trade rules.
Understanding CBAM
