## Box 1. Considerations in Designing a Carbon Pricing Mechanism

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### Context and exposure
- Trinidad and Tobago’s contribution to global greenhouse gas (GHG) emissions: 0.075 percent in 2022.
- Population context: 1.5 million and a large and globally competitive gas and petrochemical sector; country is a large emitter in sectoral terms.
- Per capita emission intensity: "1.5 kg CO2-equivalent per US$ in 2022".
- Most emissions originate from the energy and industrial sectors.
- Direct emissions (from manufacturing processes) constitute the majority of emissions for exposed exported goods; indirect emissions (from electricity used in manufacturing) have a marginal share for the fertilizer industry.

### Global carbon pricing trends and EU CBAM design
- Carbon pricing instruments: carbon taxes and emissions trading systems (ETS).
- Carbon pricing schemes introduced in 49 advanced and emerging market economies; at least 23 additional countries plan to start pricing emissions soon.
- EU ETS covers 30 countries; carbon prices have reached "as high as 100 euro per ton of CO2-equivalent".
- EU CBAM timeline and scope:
  - Transitional phase lasts until 2025 with reporting only and no payment obligations; becomes fully operational in 2026 when small fees are introduced.
  - Free allowances are phased out gradually over nine years (from 2026 to 2034) for sectors covered by CBAM.
  - CBAM covers carbon dioxide and, where relevant, nitrous oxide and perfluorocarbons; methane emissions are to be covered by supplementary mechanisms and subject to separate fossil-fuel import requirements (monitoring standards by 2027; methane intensity limits by 2030).
  - Initial CBAM scope: iron and steel, aluminum, cement, fertilizers, electricity, and hydrogen; scope may later be reviewed to include other goods covered by the EU ETS.

### Trinidad and Tobago’s exposure to EU CBAM — current and potential
- Current exposure: "about 5.1 percent (US$ 446 million) of Trinidad and Tobago’s total exports of goods are exposed to the EU’s CBAM".
- EU market share for Trinidad and Tobago: "Sixteen percent of Trinidad and Tobago’s total exports of goods are destined to the EU, equivalent to 5.7 percent of GDP or US$ 1.4 billion." (Estimates based on 2018-2022 averages.)
- Potential expansion: exports exposed to the EU’s CBAM are likely to double if CBAM’s sectoral coverage is widened to include petroleum products and petrochemicals (including methanol).
- Longer-term risk: "by the early 2030s, up to 15 percent of the Trinidad and Tobago’s current total exports of goods could be subject to emissions regulation at the border" if EU restrictions on methane intensity embedded in hydrocarbon imports are introduced.
- Fertilizer sector specifics:
  - Carbon intensity of Trinidad and Tobago’s anhydrous ammonia production exceeds the EU average.
  - Carbon intensity of mixtures of urea and ammonium nitrate almost doubles the EU level and is one third higher than the weighted average level of the EU’s imports from numerous countries.
  - Worst-case scenario estimate (no-global-redirection, ceteris paribus): CBAM-related payments by European importers of Trinidad and Tobago’s fertilizers could exceed "40 percent of the total fertilizer annual exports to the EU, or about 0.8 percent of Trinidad and Tobago’s GDP" (Annex I).

### Selected export exposures to EU CBAM (average 2018-22)
- 290511 Methanol (methyl alcohol): Total exports to EU (US$ Mill.) 399.5; Percent share of exports to EU 29.0; Percent share of total exports 4.6; May be covered by EU CBAM at the later stage: √
- 281410 Anhydrous ammonia: 288.9; 21.0; 3.3; Covered by EU CBAM: √
- 271111 Liquefied Natural gas: 254.5; 18.5; 2.9
- 310280 Mixtures of urea and ammonium nitrate in aqueous or ammoniacal solution: 152.5; 11.1; 1.8; May be covered by EU CBAM at the later stage: √
- 270900 Petroleum oils and oils obtained from bituminous minerals, crude.: 115.5; 8.4; 1.3
- 271019 Other petroleum oils and oils obtained from bituminous minerals, other than crude.: 28.1; 2.0; 0.3; May be covered by EU CBAM at the later stage: √
- 293361 Melamine: 21.0; 1.5; 0.2; May be covered by EU CBAM at the later stage: √
- 271119 Other petroleum gases and other gaseous hydrocarbons in gaseous state: 18.1; 1.3; 0.2
- 890110 Cruise ships, excursion boats and similar vessels: 16.1; 1.2; 0.2
- 271121 Natural gas in gaseous state: 12.2; 0.9; 0.1
- 271113 Butanes: 8.3; 0.6; 0.1
- 890190 Other vessels for the transport of goods and other vessels: 8.3; 0.6; 0.1
- 271112 Propane: 7.3; 0.5; 0.1
- 261790 Other ores and concentrates: 4.7; 0.3; 0.1
- 281910 Chromium trioxide: 4.7; 0.3; 0.1; May be covered by EU CBAM at the later stage: √
- 310210 Urea, whether or not in aqueous solution: 4.6; 0.3; 0.1; May be covered by EU CBAM at the later stage: √

### Shares in EU imports and global context (2018-22 shares, in percent)
- 290511 Methanol (methyl alcohol): Share of Trinidad and Tobago in total EU Imports 12.9; Share of EU in Global Imports 25.4
- 281410 Anhydrous ammonia: 14.2; 23.0
- 310280 Mixtures of urea and ammonium nitrate in aqueous or ammoniacal solution: 14.0; 48.3
- 271019 Other petroleum oils and oils obtained from bituminous minerals, other than crude: 0.0; 33.1
- 293361 Melamine: 3.5; 45.6
- 281910 Chromium trioxide: 5.8; 36.8
- 310210 Urea, whether or not in aqueous solution: 0.1; 19.3

### Trade dynamics, redirection, and analytical caveats
- Trade redirection: global petrochemical firms may redirect some exports to non-EU markets, partially offsetting CBAM-related costs in the near-term.
- Likelihood of successful redirection varies by product:
  - More likely for commodities where the EU has a smaller share in global imports (e.g., urea and ammonia).
  - Limited for products in which the EU holds a significant share of global consumption (e.g., mixtures of urea and ammonium nitrate).
- World Bank’s CBAM relative exposure index places Trinidad and Tobago among the most CBAM-exposed countries despite a relatively small share of EU-destined exports; index limitations arise from sectoral aggregation in GTAP datasets and possible mismatch between aggregate categories and CBAM-covered products.

### Emissions data, MRV, and production efficiency
- Transparency and business accountability are critical for mitigating transitional risks and supporting manufactured goods.
- EU import carbon-footprint requirements will rely on the EU’s methods in the absence of adequate data.
- National Climate Mitigation MRV system established in 2021; scaling up GHG emissions and emissions-intensity data collection is recommended.
- Historical emissions trajectory:
  - Emissions peaked in 2010, coinciding with record-high production of natural gas, LNG, and petrochemicals.
  - Since 2010, emissions have steadily decreased, reaching a level one-third lower than the 2010 peak in 2021.
  - IMF Climate Change Dashboard suggests BAU emissions by 2030 are unlikely to differ significantly from those recorded in 2022.
- Production efficiency note: reduction from full capacity to a minimum operational threshold can lead to an increase of more than 10 percent in emissions per unit of product for certain petrochemical products.
- Medium-term improvements: securing gas from bordering projects with Venezuela; other deep water gas projects expected to materialize.

### Quantification of CBAM-related payments (Annex I) — methodology and results
- Methodology:
  - Uses UN Comtrade data on export quantities to the EU-27 in the fertilizers industry (HS 2002 six-digit level).
  - Merges export quantities with GHG emission intensities estimated by Vidovic, Zore & Moya (2023).
  - CBAM-related payments computed using the average carbon price at the EU ETS for 2023.
- Key numeric results:
  - CBAM-related payments for Trinidad and Tobago estimated at $US189 million.
  - These payments represent:
    - 0.8 percent of GDP.
    - 1.3 percent of the country’s total exports.
    - 46.3 percent of the total fertilizer annual exports to the European Union.
  - EU ETS average carbon price for 2023 used in calculations: 93.03 $US/tCO2e.
- Caveats:
  - Estimates represent an upper bound and should be read cautiously.
  - A comprehensive assessment requires a detailed global general equilibrium modeling framework.
  - Short-term mitigation of adverse impacts is possible due to induced changes in global trade patterns.
  - Estimates assume full pass-through of CBAM certificate costs from EU importers to exporting firms; actual pass-through depends on commodities’ price elasticities and may vary across products.
  - Immediate CBAM-related costs will depend on the speed of the mechanism’s roll-out, planned to align with the gradual elimination of EU ETS free allowances between 2026 and 2034.

### National actions and recommended mitigation priorities
- Existing national actions and targets:
  - NDC submitted in 2018 with two targets:
    - (i) "an overall reduction of emissions from the industrial, power generation and transport sectors by 15 percent of cumulative emissions by 2030 relative to a BAU baseline, equivalent to 103 million tons of CO2 equivalent (MtCO2eq), conditional on external financial support;"
    - (ii) "an unconditional 30 percent reduction of cumulative emissions from the public transportation sector or 1.7 MtCO2eq compared to 2013 levels by 2030."
  - Strategic documents: Roadmap for a Green Hydrogen Economy.
  - Renewable developments: project under construction to install a "92 MW solar power plant."
  - Developing a feed-in tariff policy to allow small scale residential and commercial customers to co-generate electricity and sell it to the grid.
  - Joined the Global Methane Pledge (among 120 countries) aiming to "reduce anthropogenic methane emissions, representing 21 percent of the country’s total emissions" and collectively reduce global methane emissions "at least 30 percent from 2020 levels by 2030."
  - CCUS developments: pilot project considerations coordinated by newly established Carbon Capture & CO2 EOR Steering Committee; support secured from the Green Climate Fund (GCF) for a carbon capture and storage project; launched a research hub focusing on CCUS.
- Recommended focus areas:
  - Continue support and incentives to upgrade and increase the efficiency of petrochemical infrastructure.
  - Reduce carbon intensity of most exposed industries—priority on the fertilizer industry.
  - Prioritize reductions in direct emissions (manufacturing process emissions); transitioning to renewable electricity will reduce indirect emissions but yields limited gains for the fertilizer sector where indirect emissions are marginal.
  - Advance greener and more efficient manufacturing technologies.
  - Develop Carbon Capture, Utilization, and Storage (CCUS) technology and advance the respective legislative framework for its development.
  - Assess and manage transitional risks in the iron and steel industry, which "accounts for 9 percent of overall exports" and plays a role in economic diversification towards non-energy sectors.
  - Step up measurement and collection of emissions data to better prepare for CBAM and other trade-related emissions regulations.
  - Ensure predictable, long-lived natural gas supply to improve production efficiency and reduce carbon intensity scores.
  - Re-evaluate and potentially raise ambition in the emissions reduction pathway; formalize changes in an updated NDC submission to the UNFCCC.
  - Examine potential carbon pricing mechanisms with careful design to manage macroeconomic side-effects; consider fiscally neutral options with revenue recycling or tax swaps (e.g., partial reduction in royalty or Green Fund Levy).
  - Undertake a detailed, economy-wide modeling assessment (e.g., general equilibrium framework) to refine CBAM impact estimates and design appropriate mitigation and competitiveness measures.

_Italic: Content derived from IMF Working Paper — Carbon Pricing at Export Markets: Trade-Related Implications in Trinidad and Tobago._

### Box 1. Considerations in Designing a Carbon Pricing Mechanism ______________________________ 15

### Box 1. Considerations in Designing a Carbon Pricing Mechanism

### Context
- Trinidad and Tobago’s contribution to global greenhouse gas (GHG) emissions is very small—0.075 percent in 2022—but the country is substantially exposed to global low-carbon transition risks.
- With a population of about

### Annexes and references referenced on the page
- Annex I. Quantification of CBAM-related Payments Incurred by European Importers of Goods from Trinidad and Tobago
- References

*IMF WORKING PAPERS Carbon Pricing at Export Markets Trade-Related Implications in Trinidad and Tobago — wpiea2025028-print-pdf*

### 1.5 million and a large and globally competitive gas and petrochemical sector, the country is a large emitter in

### wpiea2025028-print-pdf - 1.5 million and a large and globally competitive gas and petrochemical sector, the country is a large emitter in

### Emissions profile and exposure
- Per capita emission intensity: "1.5 kg CO2-equivalent per US$ in 2022".
- Most emissions originate from the energy and industrial sectors (Figure 1).
- Direct emissions (from manufacturing processes) constitute the majority of emissions for exposed exported goods; indirect emissions (from electricity used in manufacturing) have a marginal share for the fertilizer industry.

### Global carbon pricing trends and CBAM design
- Carbon pricing instruments include carbon taxes and emissions trading systems (ETS).
- As of the document: carbon pricing schemes introduced in 49 advanced and emerging market economies; at least 23 additional countries plan to start pricing emissions soon.
- EU ETS: covers 30 countries; carbon prices have reached "as high as 100 euro per ton of CO2-equivalent".
- EU CBAM transitional and implementation timeline:
  - Transitional phase lasts until 2025 with reporting only and no payment obligations; becomes fully operational in 2026 when small fees are introduced.
  - Free allowances are phased out gradually over nine years (from 2026 to 2034) for sectors covered by CBAM.
  - CBAM covers carbon dioxide and, where relevant, nitrous oxide and perfluorocarbons; methane emissions are to be covered by supplementary mechanisms and subject to separate fossil-fuel import requirements (monitoring standards by 2027; methane intensity limits by 2030).
- CBAM scope for initial implementation: iron and steel, aluminum, cement, fertilizers, electricity, and hydrogen; scope may later be reviewed to include other goods covered by the EU ETS.

### Trinidad and Tobago’s exposure to the EU CBAM: current and potential
- Current exposure: "about 5.1 percent (US$ 446 million) of Trinidad and Tobago’s total exports of goods are exposed to the EU’s CBAM" (Figure 3, Table 1).
- EU market share for Trinidad and Tobago: "Sixteen percent of Trinidad and Tobago’s total exports of goods are destined to the EU, equivalent to 5.7 percent of GDP or US$ 1.4 billion." (Estimates based on 2018-2022 averages.)
- Potential expansion: exports exposed to the EU’s CBAM are likely to double if CBAM’s sectoral coverage is widened to include petroleum products and petrochemicals (including methanol).
- Longer-term risk: "by the early 2030s, up to 15 percent of the Trinidad and Tobago’s current total exports of goods could be subject to emissions regulation at the border" if EU restrictions on methane intensity embedded in hydrocarbon imports are introduced.
- Fertilizer sector specifics:
  - Carbon intensity of Trinidad and Tobago’s anhydrous ammonia production exceeds the EU average.
  - Carbon intensity of mixtures of urea and ammonium nitrate almost doubles the EU level and is one third higher than the weighted average level of the EU’s imports from numerous countries.
  - Worst-case scenario estimate: CBAM-related payments by European importers of Trinidad and Tobago’s fertilizers could exceed "40 percent of the total fertilizer annual exports to the EU, or about 0.8 percent of Trinidad and Tobago’s GDP" (Annex I), under no-global-redirection (ceteris paribus).
- Table 1 (average 2018-22) — Selected export exposures to EU CBAM (values reproduced exactly):
  - 290511 Methanol (methyl alcohol): Total exports to EU (US$ Mill.) 399.5; Percent share of exports to EU 29.0; Percent share of total exports 4.6; May be covered by EU CBAM at the later stage: √
  - 281410 Anhydrous ammonia: 288.9; 21.0; 3.3; Covered by EU CBAM: √
  - 271111 Liquefied Natural gas: 254.5; 18.5; 2.9
  - 310280 Mixtures of urea and ammonium nitrate in aqueous or ammoniacal solution: 152.5; 11.1; 1.8; May be covered by EU CBAM at the later stage: √
  - 270900 Petroleum oils and oils obtained from bituminous minerals, crude.: 115.5; 8.4; 1.3
  - 271019 Other petroleum oils and oils obtained from bituminous minerals, other than crude.: 28.1; 2.0; 0.3; May be covered by EU CBAM at the later stage: √
  - 293361 Melamine: 21.0; 1.5; 0.2; May be covered by EU CBAM at the later stage: √
  - 271119 Other petroleum gases and other gaseous hydrocarbons in gaseous state: 18.1; 1.3; 0.2
  - 890110 Cruise ships, excursion boats and similar vessels: 16.1; 1.2; 0.2
  - 271121 Natural gas in gaseous state: 12.2; 0.9; 0.1
  - 271113 Butanes: 8.3; 0.6; 0.1
  - 890190 Other vessels for the transport of goods and other vessels: 8.3; 0.6; 0.1
  - 271112 Propane: 7.3; 0.5; 0.1
  - 261790 Other ores and concentrates: 4.7; 0.3; 0.1
  - 281910 Chromium trioxide: 4.7; 0.3; 0.1; May be covered by EU CBAM at the later stage: √
  - 310210 Urea, whether or not in aqueous solution: 4.6; 0.3; 0.1; May be covered by EU CBAM at the later stage: √
- Table 2 (2018-22 shares, in percent):
  - 290511 Methanol (methyl alcohol): Share of Trinidad and Tobago in total EU Imports 12.9; Share of EU in Global Imports 25.4
  - 281410 Anhydrous ammonia: 14.2; 23.0
  - 310280 Mixtures of urea and ammonium nitrate in aqueous or ammoniacal solution: 14.0; 48.3
  - 271019 Other petroleum oils and oils obtained from bituminous minerals, other than crude: 0.0; 33.1
  - 293361 Melamine: 3.5; 45.6
  - 281910 Chromium trioxide: 5.8; 36.8
  - 310210 Urea, whether or not in aqueous solution: 0.1; 19.3

### Trade redirection, market dynamics, and analytical caveats
- Trade redirection: strategic behavior of global petrochemical firms could redirect some exports to non-EU markets, partially offsetting CBAM-related costs in the near-term.
- Likelihood of successful redirection varies by product:
  - More likely for commodities where the EU has a smaller share in global imports (e.g., urea and ammonia).
  - Limited for products in which the EU holds a significant share of global consumption (e.g., mixtures of urea and ammonium nitrate).
- Caveat on external indices: World Bank’s CBAM relative exposure index places Trinidad and Tobago among the most CBAM-exposed countries despite a relatively small share of EU-destined exports; index limitations arise from sectoral aggregation in GTAP datasets and possible mismatch between aggregate categories and CBAM-covered products.

### Policy implications and recommended mitigation priorities
- Existing national actions and targets:
  - Nationally Determined Contribution (NDC) submitted in 2018 with two targets:
    - (i) "an overall reduction of emissions from the industrial, power generation and transport sectors by 15 percent of cumulative emissions by 2030 relative to a BAU baseline, equivalent to 103 million tons of CO2 equivalent (MtCO2eq), conditional on external financial support;"
    - (ii) "an unconditional 30 percent reduction of cumulative emissions from the public transportation sector or 1.7 MtCO2eq compared to 2013 levels by 2030."
  - Strategic documents: Roadmap for a Green Hydrogen Economy.
  - Renewable policy developments:
    - Project under construction to install a "92 MW solar power plant."
    - Developing a feed-in tariff policy to allow small scale residential and commercial customers to co-generate electricity and sell it to the grid.
  - Joined the Global Methane Pledge (Trinidad and Tobago among 120 countries) aiming to "reduce anthropogenic methane emissions, representing 21 percent of the country’s total emissions" and collectively reduce global methane emissions "at least 30 percent from 2020 levels by 2030."
  - Ongoing efficiency and green manufacturing initiatives (e.g., Green Manufacturing Initiative; solar PV carport at Grand Stand of Queens Park Savannah).
  - CCUS developments: pilot project considerations coordinated by newly established Carbon Capture & CO2 EOR Steering Committee; support secured from the Green Climate Fund (GCF) for a carbon capture and storage project; launched a research hub focusing on CCUS.
- Recommended focus areas to mitigate transitional and CBAM risks:
  - Continue support and incentives to upgrade and increase the efficiency of petrochemical infrastructure.
  - Reduce carbon intensity of most exposed industries—priority on the fertilizer industry.
  - Prioritize reductions in direct emissions (manufacturing process emissions); transitioning to renewable electricity will reduce indirect emissions but yields limited gains for the fertilizer sector where indirect emissions are marginal.
  - Advance greener and more efficient manufacturing technologies.
  - Develop Carbon Capture, Utilization, and Storage (CCUS) technology and advance the respective legislative framework for its development.
  - Assess and manage transitional risks in the iron and steel industry, which "accounts for 9 percent of overall exports" and plays a role in economic diversification towards non-energy sectors.
  - Step up measurement and collection of emissions data to better prepare for CBAM and other trade-related emissions regulations.

*Italic: Content derived from IMF Working Paper — Carbon Pricing at Export Markets: Trade-Related Implications in Trinidad and Tobago.*

### introduction of the EU trade-related carbon regulations and support its national exports. Emissions data

### wpiea2025028-print-pdf - introduction of the EU trade-related carbon regulations and support its national exports. Emissions data

### Emissions data, transparency, and MRV
- Transparency and business accountability are critical for mitigating transitional risks and for providing well-grounded support to the country’s manufactured goods.
- The EU’s new requirements on imports’ carbon footprint will rely on the EU’s own methods and approaches for emissions accounting in the absence of adequate data.
- Trinidad and Tobago could continue scaling up efforts on gathering data on GHG emissions and emissions intensities of production processes, including through its National Climate Mitigation Monitoring, Reporting, and Verification (MRV) system set in 2021.
- Historical emissions trajectory:
  - Emissions peaked in 2010, coinciding with record-high production rates of natural gas, LNG, and petrochemicals.
  - Since 2010, emissions have steadily decreased, reaching a level one-third lower than the 2010 peak in 2021.
  - The IMF Climate Change Dashboard suggests that the BAU emissions by 2030 are unlikely to differ significantly from those recorded in 2022.

### Natural gas supply, production efficiency, and investment in low-carbon technology
- Securing stable and ample supply of natural gas to existing petrochemical facilities should increase production efficiency and help stimulate investment in low-carbon technology.
- Recent challenges in gas supply have led to certain petrochemical facilities operating near their minimum capacity, compromising production-process efficiency.
- Evidence from the corporate sector: for certain petrochemical products, the reduction from full capacity to a minimum operational threshold can lead to an increase of more than 10 percent in emissions per unit of product.
- Medium-term developments that could improve gas supply and support investments:
  - Securing gas from bordering projects with Venezuela.
  - Other deep water gas projects expected to materialize in the medium term.
- Stable revenues from the energy sector are identified as a key prerequisite for financing the energy transition, including renewable energy development.

### Nationally Determined Contribution (NDC) and emissions reduction pathway
- Trinidad and Tobago NDC target:
  - Reduce emissions in key emitting sectors (power generation, transportation, and industry) by 15 percent relative to business-as-usual (BAU) by 2030 conditional on international financing.
  - Unconditionally, Trinidad and Tobago aims to reduce emissions by 30 percent relative to 2013 emissions only in the sector of public transportation.
- Assessment:
  - Emission reduction pathways aligned with the NDCs of the main petrochemical exports may be insufficient to bridge the emissions gap relative to primary competitors.
  - Transition risks from climate actions by advanced and emerging economies and increasing market competition require revision of the emissions reduction pathway.
  - Recommendation: formalize revisions in an updated NDC submission to the UNFCCC.

### Carbon pricing considerations and design recommendations
- Trinidad and Tobago could consider introducing a carbon pricing mechanism (ETS or carbon tax) to:
  - Stimulate economic diversification.
  - Help reduce exposure to the EU’s Carbon Border Adjustment Mechanism (CBAM).
  - Consolidate and elevate progress of government and other green initiatives (boost renewable energy investment, accelerate green hydrogen roadmap, increase energy-sector efficiency, scale up CCUS and other low-carbon technologies).
- Key design considerations highlighted:
  - Emissions coverage.
  - Level and rate of price increase.
  - Revenue recycling (or simultaneous reduction in existing taxes).
  - Point of regulation (upstream vs. midstream/downstream).
  - Use of offsets.
- Examples and design lessons:
  - British Columbia’s revenue-neutral carbon tax (2008) paired with reductions in corporate and personal income taxes.
  - China’s national ETS (intensity-based cap) adjusts depending on actual output level to alleviate growth impacts.
- WTO compliance note:
  - To be compliant with WTO rules and capture revenues equivalent to EU CBAM taxes, a domestic carbon tax would need to be applied universally to all exports (as well as domestic consumption) of CBAM-covered products—entailing wider macroeconomic, fiscal, and trade implications.
- Fiscal option for Trinidad and Tobago to explore:
  - A fiscally neutral carbon tax accompanied by partial reduction in existing taxes (e.g., royalty or Green Fund Levy), subject to further investigation.

### Quantification of CBAM-related payments (Annex I)
- Methodology:
  - Uses UN Comtrade data on Trinidad and Tobago’s export quantities to the EU-27 in the fertilizers industry (HS 2002 six-digit level).
  - Merges export quantities with GHG emission intensities for each product estimated by Vidovic, Zore & Moya (2023).
  - CBAM-related payments computed using the average carbon price at the EU ETS for 2023.
- Key numeric results:
  - CBAM-related payments for Trinidad and Tobago estimated at $US189 million.
  - These payments represent:
    - 0.8 percent of GDP.
    - 1.3 percent of the country’s total exports.
    - 46.3 percent of the total fertilizer annual exports to the European Union.
  - EU ETS average carbon price for 2023 used in calculations: 93.03 $US/tCO2e.
- Caveats and interpretation:
  - Estimates represent an upper bound and should be read cautiously.
  - A comprehensive assessment requires a detailed global general equilibrium modeling framework.
  - Short-term mitigation of adverse impacts is possible due to induced changes in global trade patterns (e.g., strategic behavior of global petrochemical firms redirecting exports to non-EU markets).
  - Estimates assume full pass-through of CBAM certificate costs from EU importers to exporting firms; actual pass-through depends on commodities’ price elasticities and may vary across products.
  - Immediate CBAM-related costs will also depend on the speed of the mechanism’s roll-out, planned to align with the gradual elimination of EU ETS free allowances between 2026 and 2034.

### Policy recommendations and next steps
- Scale up GHG emissions and emissions-intensity data collection via the National Climate Mitigation MRV system.
- Ensure predictable, long-lived natural gas supply to improve production efficiency and reduce carbon intensity scores.
- Re-evaluate and potentially raise ambition in the emissions reduction pathway; formalize changes in an updated NDC submission to the UNFCCC.
- Examine potential carbon pricing mechanisms with careful design to manage macroeconomic side-effects; consider fiscally neutral options with revenue recycling or tax swaps (e.g., partial reduction in royalty or Green Fund Levy).
- Undertake a detailed, economy-wide modeling assessment (e.g., general equilibrium framework) to refine CBAM impact estimates and design appropriate mitigation and competitiveness measures.

*IMF Working Paper No. WP/2025/028*

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_Source: https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025028-print-pdf.pdf_