The Network Effects of the EU Carbon Border Adjustment Mechanism with a Quantitative Trade Model

[2506.23341] The Network Effects of the EU Carbon Border Adjustment Mechanism with a Quantitative Trade Model Skip to main content Search Submit Donate Log in Search arXiv Press Enter to search · Advanced search Economics > General Economics arXiv:2506.23341 (econ) [Submitted on 29 Jun 2025 ( v1 ), last revised 11 Apr 2026 (this version, v5)] Title: The Network Effects of the EU Carbon Border Adjustment Mechanism with a Quantitative Trade Model Authors: Noemi Walczak , Kenan Huremović , Armando Rungi View a PDF of the paper titled The Network Effects of the EU Carbon Border Adjustment Mechanism with a Quantitative Trade Model, by Noemi Walczak and 2 other authors View PDF HTML (experimental) Abstract: We investigate the economic and environmental impacts of the European Carbon Border Adjustment Mechanism (CBAM) using a multi-country, multi-sector general equilibrium model with input-output linkages. We quantify the general equilibrium responses of trade flows, expenditures, and emissions. To our knowledge, we are the first to endogenize both carbon prices and the CBAM price. We find that, once fully implemented, CBAM could reduce carbon emissions embodied in EU imports by 5.19%. In the absence of global production network adjustments, this reduction would be larger (8.84%), highlighting the substitution effects along global supply chains. At the same time, CBAM slightly increases EU Gross National Expenditure (GNE) through terms-of-trade effects and induces a reallocation of sourcing toward domestic and relatively cleaner inputs. For non-EU countries, the aggregate effects are modest: GNE declines by 0.02%, and emissions fall by 0.11%. Overall, our results underscore the importance of accounting for global supply chains when evaluating border carbon policies. We conclude that policies targeting supply-chain emissions are essential for capturing the full carbon footprint of production. Subjects: General Economics (econ.GN) Cite as: arXiv:2506.23341 [econ.GN] (or arXiv:2506.23341v5 [econ.GN] for this version) https://doi.org/10.48550/arXiv.2506.23341 Focus to learn more arXiv-issued DOI via DataCite Submission history From: Noemi Walczak [ view email ] [v1] Sun, 29 Jun 2025 17:24:07 UTC (533 KB) [v2] Tue, 1 Jul 2025 17:24:43 UTC (536 KB) [v3] Sat, 23 Aug 2025 12:05:29 UTC (845 KB) [v4] Wed, 12 Nov 2025 09:05:35 UTC (751 KB) [v5] Sat, 11 Apr 2026 11:38:44 UTC (751 KB) Full-text links: Access Paper: View a PDF of the paper titled The Network Effects of the EU Carbon Border Adjustment Mechanism with a Quantitative Trade Model, by Noemi Walczak and 2 other authors View PDF HTML (experimental) TeX Source view license Current browse context: econ.GN < prev | next > new | recent | 2025-06 Change to browse by: econ q-fin q-fin.EC References & Citations NASA ADS Google Scholar Semantic Scholar export BibTeX citation Loading... BibTeX formatted citation × loading... Data provided by: Bookmark Bibliographic Tools Bibliographic and Citation Tools Bibliographic Explorer Toggle Bibliographic Explorer ( What is the Explorer? ) Connected Papers Toggle Connected Papers ( What is Connected Papers? ) Litmaps Toggle Litmaps ( What is Litmaps? ) scite.ai Toggle scite Smart Citations ( What are Smart Citations? ) Code, Data, Media Code, Data and Media Associated with this Article alphaXiv Toggle alphaXiv ( What is alphaXiv? ) Links to Code Toggle CatalyzeX Code Finder for Papers ( What is CatalyzeX? ) DagsHub Toggle DagsHub ( What is DagsHub? ) GotitPub Toggle Gotit.pub ( What is GotitPub? ) Huggingface Toggle Hugging Face ( What is Huggingface? ) ScienceCast Toggle ScienceCast ( What is ScienceCast? ) Demos Demos Replicate Toggle Replicate ( What is Replicate? ) Spaces Toggle Hugging Face Spaces ( What is Spaces? ) Spaces Toggle TXYZ.AI ( What is TXYZ.AI? ) Related Papers Recommenders and Search Tools Link to Influence Flower Influence Flower ( What are Influence Flowers? ) Core recommender toggle CORE Recommender ( What is CORE? ) Author Venue Institution Topic About arXivLabs arXivLabs: experimental projects with community collaborators arXivLabs is a framework that allows collaborators to develop and share new arXiv features directly on our website. Both individuals and organizations that work with arXivLabs have embraced and accepted our values of openness, community, excellence, and user data privacy. arXiv is committed to these values and only works with partners that adhere to them. Have an idea for a project that will add value for arXiv's community? Learn more about arXivLabs . Which authors of this paper are endorsers? | Disable MathJax ( What is MathJax? ) We gratefully acknowledge support from our major funders , member institutions , , and all contributors. About · Help · Contact · Subscribe · Copyright · Privacy · Accessibility · Operational Status (opens in new tab) Major funding support from

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