EU carbon border tax will do little to cut emissions: ADB study

ADB report warns EU's Carbon Border Adjustment Mechanism may not reduce emissions, hurting Asian exports and EU manufacturers.

A European Union plan to impose tariffs on high-carbon imports could hurt developing countries in Asia but is unlikely to lead to big reductions in greenhouse gas emissions, the Asian Development Bank (ADB) said in a report published on Monday.

The Carbon Border Adjustment Mechanism (CBAM) was introduced to address concerns that the outsourcing of manufacturing had put large parts of the EU's supply chain beyond the reach of its emissions trading scheme (ETS), a situation described as "carbon leakage".

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It was designed to level the playing field and make foreign suppliers pay the same carbon price as domestic ones, even if they are not subject to an ETS or carbon tax at home.

ADB said CBAM was expected to cut Asian exports to the EU, particularly from western and southwestern Asia, with steel from India also likely to take a hit.

But any small reduction in emissions would quickly be offset by the continuing increase in carbon-intensive production throughout Asia, and mechanisms to share emission reduction technology would be more effective, it said.

"It's actually a relatively limited policy at the moment," said Neil Foster-McGregor, ADB's senior economist. "It only imports into the EU (and) only covers six sectors.