The European Union’s CBAM: averting emissions leakage or promoting the diffusion of carbon pricing?

2025/11/02 by Michael Mehling, Geoffroy Dolphin, Robert A. Ritz · 1 voice
Economics, Econometrics and Finance · Energy · Decision Sciences · #Climate Change Policy and Economics #Energy, Environment, and Transportation Policies #demographic modeling and climate adaptation

paper · pdf · doi:10.1080/1523908x.2025.2591794

openalex created_date 2025/10/10 · openalex publication_date 2025/11/02 · openalex updated_date 2026/07/28

Abstract

Adopted in 2023, the Carbon Border Adjustment Mechanism (CBAM) is a significant component of the European Union’s ambitious decarbonization strategy under the European Green Deal. This article questions the output effectiveness of the CBAM in achieving its stated objective, prevention of carbon leakage, while demonstrating its impact effectiveness as an instrument for advancing the global diffusion of carbon pricing. Empirical evidence for carbon leakage remains sparse, and implementation challenges might limit the capacity of the CBAM to counteract leakage even where it occurs. Nonetheless, the CBAM has already demonstrated a powerful spillover effect by incentivizing the acceleration of carbon pricing roadmaps across EU trade partners, suggesting that trade-related climate measures can effectively encourage global climate action. As the EU navigates the complexities of operationalizing the CBAM, it must balance several tradeoffs to maintain this important spillover effect. If successful, the CBAM could catalyze a virtuous cycle of carbon pricing adoption, reinforcing its potentially pivotal role in the EU’s toolbox to manage the environment-trade nexus.

Citations

• Climate change policy, market structure, and carbon leakage
• Article: Subsidy-Related Aspects of the EU Carbon Border Adjustment Mechanism (CBAM)
• The external impact of EU climate policy: political responses to the EU’s carbon border adjustment mechanism
• Know your opponent: Which countries might fight the European carbon border adjustment mechanism?
• The Brussels Effect
• Designing Border Carbon Adjustments for Enhanced Climate Action
• The Paris Agreement and the new logic of international climate politics
• Leakage from Sub-national Climate Policy: The Case of California’s Cap-and-Trade Program

Discussions

• Published online OA: The European Union’s CBAM: averting emissions leakage or promoting the diffusion of carbon pricing? Michael A. Mehling, Geoffroy Dolphin & Robert A. Ritz @mit.edu @ox.ac.uk @un [bsky, 0 points, 0 comments]