Europe’s carbon border adjustment sparks decarbonization and price surge

The Carbon Border Adjustment Mechanism, a policy that will require producers of goods imported into the European Union (EU) to pay an emissions levy, should fast-track decarbonisation efforts, but also result in prices rising across several sectors sharply, the report says.

The new report focuses on three value chains, oil, steel and hydrogen and looks at how the mechanism could change global trade flows. The report also details the impact it will have on consumers in the EU.    

According to Wood Mackenzie, the impact of the EU CBAM will be felt globally as countries with existing carbon pricing and/or less carbon intensive commodities will gain a competitive advantage over countries that don’t.    

“The CBAM will drive the world further down the path towards decarbonisation, with the effects being felt globally. Initial reactions could result in a significant reshuffling of trade flows, which could stretch over a decade,” says Elena Belletti, Global Head of Carbon Research at Wood Mackenzie.