European Union Carbon Border Adjustment Mechanism: Economic Impact and Implications for Asia

This brief assesses the impact of the European Union’s carbon tariffs on energy-intensive exports from Asia and the Pacific and shows how upgrading product value, boosting energy efficiency, and cutting emissions can help mitigate its effect.It explains how the Carbon Border Adjustment Mechanism (CBAM) is designed to prevent carbon leakage–where industries shift to countries with less stringent environmental rules. Providing a regional breakdown, the brief shows how sectors including Indian steel and Georgian fertilizer are among those hit. It outlines how steps such as developing and integrating regional carbon markets and increasing decarbonization can reduce countries’ CBAM risk exposure.