Supplementary files (ESR) - Assessing the Impact of EU-CBAM on the Global Economy

The European Union’s introduction of a carbon tax through the Carbon Border Adjustment Mechanism (CBAM) has elicited concerns regarding its potential economic ramifications on the global economies. This paper assesses the effects of the CBAM on all economies exporting to the EU27 market, focusing on economies by income, including the least-developed countries (LDCs) and the middle-income Countries’ (MICs), using the input-output and the Global Trade Analysis Project -Energy (GTAP-E) models. Simulation results show that emissions in most EU trading regions will likely decline. Similarly, real GDP, exports and import flows, and welfare of most regions exporting to the EU27 will significantly diminish. Nevertheless, the nature and magnitude of these impacts exhibit variability. Notably, in contrast to the developed, upper-middle, and lower-middle-income countries, the least developed countries experience a comparatively marginal impact. These findings suggest that the influence of CBAM is contingent upon the specific geographic region and industry under consideration.