Impact of carbon border adjustment mechanism scope expansion on global carbon emissions and the economy

Developed economies, including the European Union (EU), advocate using cross-border carbon pricing to promote global carbon emission reductions and safeguard the competitiveness of their industries. The carbon border adjustment mechanism (CBAM) is expanding its coverage to include more sectors and regions. To accurately assess CBAM's impact on carbon reduction and the economy and scientifically prevent policy shocks, this study established a baseline scenario, a sectoral expansion scenario, and a regional expansion scenario using the Global Trade Analysis Project-Energy and Environmental version (GTAP-E) model based on the operational rules of the EU CBAM. Quantitative analysis was conducted on the changes in carbon emissions and key economic indicators in different regions and industries under the action of CBAM, and the multiple impacts of policies were comprehensively evaluated. The results show that CBAM's effect on reducing carbon emissions is small, globally. Global carbon emissions decrease by only 0.05%-0.25% across the scenarios. This limited impact is mainly due to production and trade relocation between regions and sectors, coupled with significant substitution effects among energy sources and other intermediate inputs. Regionally, carbon emissions increase in regions implementing CBAM (like the EU), which also experience significant positive economic benefits. Conversely, carbon emissions decrease in regions subject to CBAM (like China), but they suffer substantial economic losses. Sectorally, changes in carbon emissions vary significantly. Under the combined effects of scale effects, substitution effects, and upstream-downstream linkages within supply chains, carbon emissions decrease in sectors directly covered by CBAM and their upstream raw material supply sectors. However, carbon emissions increase to varying degrees in other uncovered sectors. China should actively respond to CBAM's multiple impacts. Key measures include accelerating the improvement of its domestic carbon pricing mechanism, strengthening international dialogue and cooperation, and vigorously promoting the green and low-carbon transformation of its enterprises.