The synergistic impact of the EU's provision of low-carbon technical assistance under the carbon border adjustment mechanism: A GTAP model-based study

Abstract

To mitigate carbon leakage risks and safeguard the competitiveness of the EU domestic industries, the European Commission instituted the Carbon Border Adjustment Mechanism (CBAM). However, as a unilateral environmental policy, the CBAM may face retaliatory measures from the EU’s trading partners, raising concerns about potential negative impacts on the EU. It is important to consider whether providing low-carbon technology support and preferential carbon tariffs to developing countries could mitigate the negative repercussions for the EU. To investigate these issues, this study employs the Global Trade Analysis Project (GTAP) Computable General Equilibrium Model to examine the impacts on the EU’s economy under the different scenarios. The simulation results demonstrate that retaliatory measures implemented by developed and developing countries against the EU would impose a negative impact on the EU's economy. However, providing low-carbon technological support and preferential carbon tariffs to developing countries would mitigate such adverse effects on the EU’s economy.