Turning the EU’s Carbon Border Adjustment Mechanism into a green development tool

This policy brief, published by Europe Jacques Delors, addresses the heated global debate surrounding the EU’s Carbon Border Adjustment Mechanism (CBAM) and proposes a constructive path forward. The CBAM has provoked strong reactions from several of the EU’s trading partners, who view the mechanism as a protectionist measure that unfairly penalizes developing countries with limited capacity to decarbonize. At the same time, the EU views it as necessary to prevent carbon leakage. This policy brief calls for a shift away from these seemingly irreconcilable positions, towards a more constructive approach to the CBAM. The EU should adopt a more development-friendly approach to its green policies, which must go hand-in-hand with a degree of pragmatism from developing countries and LDCs.

The brief begins by mapping the landscape of concerns raised by partner countries. These include the perceived unilateral nature of the CBAM, the absence of meaningful consultations with affected economies, the failure to account for differing levels of development and institutional capacity, and the potential for the mechanism to disrupt established trade patterns in carbon-intensive sectors such as steel, cement, aluminium, and fertilizers.

This policy brief zooms in on how adopting a pragmatic approach could take the shape of conducting CBAM Impact Assessments. The authors suggest key elements that such assessments should cover, highlighting how this will enable going beyond the current EU’s one-size-fits-all approach, and they provide relevant examples.

While developing countries and LDCs should be responsible for carrying out CBAM Impact Assessments, the European Commission should provide the technical and financial support necessary to assist countries in doing so. These impact assessments could then serve as a basis for the EU to fine-tune and step up financial and technical assistance according to developing countries’ level of exposure and vulnerability to CBAM. The paper also suggests exploring the use of CBAM revenues to fund green development initiatives in partner countries, notably those with high levels of CBAM exposure and vulnerability, thereby transforming the mechanism from a perceived burden into a source of investment for the clean transition.

By stressing the need for effective responses from both the EU and its trading partners, this brief presents a pathway for using CBAM as a tool for green development.