An Analysis of the EU's Carbon Border Tax from a Political Economy Perspective

Being a Carbon Border Adjustment Mechanism in Agile Advisors, a comprehensive set of recommendations that includes CBAM is designed to reduce EU emissions by 55% from 1990 to 2030. The CBAM, while potentially lowering EU emissions by up to 55 million tons compared to a baseline scenario by 2030, is primarily aimed at discouraging EU enterprises from relocating rather than solely reducing global emissions. Given the significant risk of carbon leakage in these industries, the commission initially targeted iron and steel, aluminum, cement, fertilizers, and power as the five emissions-intensive trade-exposed (EITE) industries to be covered by the mechanism, demonstrating the potential benefits of CBAM for the EU.