WEBINAR RECORDING · 2024-01
Carbon Border Adjustment Mechanisms
In this conversation: Stuti Toshi (Legal presenter); Amar Breckenridge (Economic presenter); Ben Shepherd (Moderator)
The session examines CBAM as a response to unequal carbon prices, with contested legal and distributional implications. Economic effects depend on adjustment across sectors and markets; emissions-price volatility creates a separate uncertainty channel.
Session information draws on the recording and its original description. Affiliations and policy context refer to the time of the webinar.
FROM THE CONVERSATION
Three takeaways.
What they mean in practice.
Prepared from the session recording using automatic transcription and editorial review. Follow the timestamp links for the original wording and context.
Carbon pricing is narrower than climate ambition
Watch 42:03 ↗Breckenridge distinguishes correcting carbon-price differences from addressing every source of carbon leakage. Countries can pursue abatement through regulation or subsidies without a carbon price, with different production-cost effects.
Policy interpretation: Assess partners' broader climate policies rather than equating absence of a carbon price with absence of abatement.
Volatility matters independently of average charges
Watch 46:42 ↗The EU limits emissions quantities and permits prices to adjust. Breckenridge argues that changing emissions prices can transmit EU shocks through fluctuating CBAM charges, undermining predictable market access even when average modeled effects are modest.
Policy interpretation: Monitor uncertainty and consider ways to manage volatility alongside average trade costs.
Aggregate moderation conceals unequal adjustment
Watch 49:41 ↗Breckenridge reports relatively limited overall modeled effects but larger adverse effects in sub-Saharan Africa. Terms-of-trade and real-exchange-rate adjustments partly redirect exports, while higher capital costs can penalize growth. Toshi separately emphasizes reporting burdens and proposes green finance and technology support.
Policy interpretation: Pair country-specific assessment with adjustment support, capacity building and reductions in other trade costs.
From the discussion
In Q&A, Toshi argues that historical emissions deserve greater consideration (53:30). Breckenridge accepts Shepherd's point that diversion to third markets moderates bilateral impacts and frames comparison as second best without a global carbon price (55:38–56:29). He proposes reducing other trade costs and examining ways to smooth volatility (57:21). Shepherd emphasizes nonpricing abatement and trade-policy uncertainty as unresolved questions (58:11).
