CRA Insights: The EU carbon border adjustment: Our initial views

On 4 March 2020, the European Commission  launched a consultation for a carbon border adjustment mechanism (CBAM) with the publication of an inception impact assessment (IIA).The CBAM is part of a proposed suite of tools to support the long-term objectives of the European Green Deal. The CBAM could take various forms but would largely amount to an effective tax on carbon emissions associated with imported goods. When implemented, it could potentially change the pattern of trade flows as well as the geography and type of energy demanded across the world, creating risks for stranded assets but also new opportunities to deploy capital.
In this edition of CRA Insights: Energy, our London colleagues discuss their initial views on the potential impact of the CBAM. We first summarise the key points from the IIA. We then outline some potential design features and discuss their implications. We then discuss key questions for energy and manufacturing firms.