The Asian Development Bank (ADB) warns that a European Union plan to impose tariffs on high-carbon imports could negatively impact developing Asian countries but is unlikely to significantly reduce greenhouse gas emissions.
The Carbon Border Adjustment Mechanism (CBAM) was introduced to address concerns over outsourcing manufacturing, which limited the EU's supply chain's reach under its emissions trading scheme.
The policy aims to level the playing field by requiring foreign suppliers to pay the same carbon price as domestic ones, regardless of their domestic carbon tax.
The ADB predicts that CBAM will significantly reduce Asian exports to the EU, particularly from western and southwestern Asia, and potentially impact steel from India.
The report suggests that reducing emissions in Asia would be counterbalanced by the ongoing rise in carbon-intensive production, suggesting the need for more effective emission reduction mechanisms.
ADB's senior economist, Neil Foster-McGregor, stated that the policy is currently limited, focusing only on imports into the EU and covering six sectors.
The increasing scale of production, despite global carbon pricing, will continue to result in rising emissions unless fundamental changes in production techniques are made.
Foster-McGregor predicts that CBAM could generate around 14 billion euros ($15.2 billion) in revenue by 2030, which could be used to finance climate finance for developing countries to decarbonize manufacturing.
The CBAM aimed to encourage non-EU economies to adopt stricter climate policies by reducing the CBAM levy if exporting nations can prove carbon price payment.
India is considering imposing export taxes on CBAM-Covered products sold to Europe, while China is expanding its Export Tax System (ETS) to cover exporting sectors like steel.
Both China and Europe have expressed criticism of CBAM, with China warning Europe not to use climate as an excuse for trade protectionism.
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