EU’s Carbon Border Adjustment Mechanism (CBAM) could boost global emissions cuts by 73 per cent compared with EU climate policy alone, a study claims.
Net global emissions decline to be lower.
CBAM can curb carbon leakage, push partners to adopt carbon pricing and help form a wider climate coalition.
The European Union's carbon pricing on imports could significantly strengthen climate policies beyond its borders, increasing global emissions reductions by 73 per cent compared with the impact of EU climate policy alone, according to a new study by the Potsdam Institute for Climate Impact Research (PIK).
The study, published in the Journal of the Association of Environmental and Resource Economists (JAERE), examines the impact of the EU's Carbon Border Adjustment Mechanism (CBAM), which was extended in early 2026 to cover imports of carbon intensive products. The mechanism requires exporters to the EU to pay a carbon levy unless their home countries have equivalent carbon pricing systems.
Researchers found that CBAM not only curbs carbon leakage but also encourages trading partners to introduce their own carbon pricing policies, creating a wider international climate coalition.
Without border adjustment measures, the study found that a substantial share of the EU's climate gains could be offset by rising emissions elsewhere. A European carbon price of $100 per tonne reduces emissions within the EU by 505 million tonnes of CO2 annually.
However, emissions outside the EU increase as production shifts abroad and countries benefit from lower fossil fuel prices. As a result, net global emissions decline by only 305 million tonnes annually. Carbon leakage offsets 40 per cent of the EU's emissions reductions.
The study found that the EU's carbon border levy substantially strengthens the effectiveness of domestic climate policies. With CBAM in place, carbon leakage falls to 15 per cent from 40 per cent, global emissions reductions rise to 399 million tonnes of CO2 annually. If major trading partners introduce their own carbon pricing systems in response, global emissions reductions increase further to 691 million tonnes annually. This represents a 73 per cent increase over the emissions cuts achieved through EU climate policy alone, the study said.
"CBAM is intended to enable the EU industry to decarbonise while remaining competitive, but what happens outside of the EU is not less significant," said Timothé Beaufils, lead author of the study and researcher at PIK.
"We already observe other countries like Brazil or Turkey responding to the CBAM with their own carbon price. We developed a novel framework to estimate this policy diffusion effect. It provides a strong indication that the EU Green Deal has indeed the potential to trigger the reinforcement of climate policies in other countries," he added.
Using trade data covering 56 economic sectors and 43 countries, researchers assessed how trading partners would respond to the EU's carbon pricing regime. Canada, Japan, South Korea and Taiwan are likely to introduce domestic carbon pricing rather than pay the EU carbon levy. These countries would effectively join what researchers describe as a climate coalition. Their participation accounts for much of the additional emissions reductions identified in the study.
CBAM currently applies to imports of steel, iron, aluminium, cement, fertilisers, electricity and hydrogen. Researchers say wider sectoral coverage could further strengthen global climate cooperation.
Additional modelling suggests the United States could become part of the climate coalition if CBAM expands to more sectors. China would only find participation economically attractive under current conditions if carbon prices remained below $20 per tonne. The finding that CBAM encourages carbon pricing adoption remains robust across a broad range of modelling assumptions.
The study argues that the EU's role in global trade could allow its climate policies to influence regulatory choices well beyond its borders.
"Our findings support and quantify the hypothesis that the EU CBAM can trigger a so-called Brussels effect," said Leonie Wenz, researcher at PIK and co author of the study.
"What this means is that, due to the EU's central position in international supply chains, policies adopted in Brussels spill over to outside the EU. Greater climate action leads to even greater climate action. This can play an important role in climate mitigation, especially if international negotiations on climate mitigation stall," Wenz added.
The findings suggest that carbon border adjustments can do more than prevent carbon leakage and protect domestic industries. However, other studies, including a July 2024 report by the Centre for Science and Environment and an African Climate Foundation study, have criticised CBAM for having minimal impact on global emissions and for not requiring the EU to transfer finance.
According to these reports, CBAM’s climate benefits remain uncertain and largely modelled. What is clear is that developing countries are being asked to finance their own industrial decarbonisation, while the EU faces no corresponding obligation to provide climate finance or technological support.