Study contract- Support to the Commission for the assessment of the carbon leakage risk for goods subject to CBAM and produced in the Union for export to third countries which do not apply the EU ETS or a similar carbon pricing mechanism

In a world with unequal carbon prices the EU ETS has given rise to the concern of carbon leakage, the relocation of industrial production to countries outside of the EU due to European Climate Policy. The purpose of the Carbon Border Adjustment Mechanism ( CBAM ) is to level the playing field by ensuring that the carbon price of imports and domestic products under the CBAM are equivalent. While the CBAM ensures that the carbon price of imports and domestic products are equivalent on the internal market, it is the case that this protection does not extend to European exports for sectors covered by the CBAM that may face a competitive disadvantage as it is introduced gradually in alignment with the phasing out of the free allocation of allowances under the EU ETS. The aim of this study is to assess the risk of carbon leakage of exports.