CBAM: How the world will share the EU’s climate ambitions Report

Insight 02 June 2022

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Report summary

After years of debate, the European Union’s Carbon Border Adjustment Mechanism (CBAM) implementation is proceeding at full speed. The first of its kind, this measure will impose a carbon price on the import of certain goods into the EU, equalising carbon costs of EU and non-EU products. Despite open questions remain to be addressed, Wood Mackenzie expects the CBAM to continue on an accelerated schedule and wider scope, impacting businesses within and beyond the EU.

Executive summary
CBAM: how the world will share the EU’s climate ambitions
- The EU is pushing for early implementation and wider scope of the CBAM
- How will the CBAM impact the EU market?
- Importers will face higher carbon and administrative costs
- Producers will no longer be shielded by free allowances
- Manufacturers may pass higher costs to consumers
- EU trade partners will feel greater pressure in relevant upstream materials sectors
- EU trade partners will eventually want to introduce a domestic carbon tax, with cascading effects globally
- The CBAM will likely change competitive dynamics between the EU and foreign producers
- Will the EU CBAM generate a decarbonization domino ?
- Wood Mackenzie expects the CBAM to continue on an accelerated schedule and wider scope

Tables and charts

This report includes 12 images and tables including:

CBAM legislative process
An extended scope and an earlier implementation of the CBAM

EU ETS allowance auction (2021-2032)
Phase-out of free allowances
Effective CBAM rate
EU’s import value in CBAM sectors and carbon price in trade partners
EU steel import composition by value (2021)
Average steel plant emission intensity
EU aluminium import value composition by value (2021)
Average aluminium smelter emission intensity
Change in comparative advantage associated with carbon cost (steel and aluminium)