Preliminary Impact Assessment of Carbon Border Adjustment Mechanism on Russian Economy

Abstract

The principal objective of the European Commission with the proposal of Carbon Border Adjustment Mechanism (CBAM) is to impose a levy on imports in particular energy-concentrated European sectors which are relative to carbon content of imported goods. The integration of carbon tax is very likely to result, that CBAM will have significant impact on international trade among European Union and Russia within the ACEFIS (aluminium, cement, electricity, fertilizers, iron, steel) industries. Therefore, the key question that authors of article addressed was the extent to which the CBAM policy trade instrument could affect Russian economy. The classification of the preliminary impact assessment in this article relies on the case-study concept with empirical data. The most significant impact could be represented on the Russian exports of iron and steel, whereas, the carbon levies would represent—€ 655 million in 2020 and € 398 million for fertilizers. The preliminary analysis clearly highlights that integration of CBAM can arise additional costs of imports from Russia within ACEFIS industries by more than € 1.1 billion. The levies from integration of CBAM could result in additional costs either on the side of exporters (Russia) in the form of loss in market share, or on the side of importers (European Union) in the form of shift of demand from ACEFIS goods or shift towards suppliers from most favourable regions. The ambition to create carbon neutral world is promising; however, decrease of the degree of carbon extensive industries will require a lot of additional investments.