IMF Working Papers

The EU's CBAM: Implications for Member States and Trading Partners

By Geoffroy Dolphin, Gianluigi Ferrucci

June 20, 2025

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Format: Chicago

Geoffroy Dolphin, and Gianluigi Ferrucci. "The EU's CBAM: Implications for Member States and Trading Partners", IMF Working Papers 2025, 125 (2025), accessed July 19, 2025, https://doi.org/10.5089/9798229000420.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The EU Carbon Border Adjustment Mechanism (CBAM) came into force on October 1, 2023, introducing reporting requirements for importers of covered products and, from 2026, an obligation to pay a fee on the carbon content of imported goods. This paper uses indices of ad valorem tariffs to assess the incidence of the EU CBAM on both EU member states and the EU’s trading partners. Overall, the direct impact on EU countries’ trade is estimated to be small, adding 0.1 percent to the value of EU imports when averaged across all imports, and 0.04 percent to the average cost of non-EU countries’ exports to the EU—with a maximum of 1.2 percent. However, effects could be sizeable for specific products such as iron, steel and aluminium, which can help explain CBAM’s political salience. Moreover, an expanded CBAM featuring full coverage of ETS sectors and a significantly higher carbon price could entail larger costs in the more distant future.

Subject: Environment, Exports, Greenhouse gas emissions, Imports, International trade, Trade balance

Keywords: Carbon Leakage, Carbon Taxation, CBAM cost, CBAM products, Emission allowance, Emissions Trading, EU Carbon Border Adjustment Mechanism, EU ETS price, EU's CBAM, Expanded CBAM, Exports, Global, Greenhouse gas emissions, Imports, Trade balance, Trade Policy

Publication Details

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