1、October 2022A working paper bySupported byAddressing the Riskof Carbon Leakage:Assessing the EUs Carbon Border Adjustment MechanismContents1.Introduction12.The Problem of Carbon Leakage 23.TheCarbonBorderAdjustmentMechanism:OneSolutiontoCarbonLeakage43.1 BackgroundandRationale43.2 ElementsoftheEUsCB

2、AMandHowitWillWork64.EffectivenessandFeasibilityoftheEUsCBAM84.1 PoliticalandLegalResistancefromTradingPartners84.1.1 PoliticalResistance84.1.2 WTO-compatibilityoftheEUsCBAM104.2 FeasibilityofImplementingtheEUsCBAM134.3 InabilitytoFullyAddressAllSourcesofCarbonLeakage145.AlternativeProposalsforEncou

3、ragingSustainableTrade155.1“CarbonClub”andInternationalCarbonPriceFloor155.2 Output-basedAllocationofAllowances166.Conclusion18Annex:LiteratureReview19References 20AcknowledgementsThe authors of this Singapore Institute of International Affairs(SIIA)workingpaperareAssociateProfessorSimonTay,Chairman

4、,MeixiGan,DeputyDirector(Sustainability),Aaron Choo,Senior Assistant Director(Special Projects andSustainability),andNgSzeHian,Intern(Sustainability).ClairePan,AssistantDirector(Sustainability)alsocontributedtothispaper.Allviewsexpressedinthepaperarethoseoftheauthors,unlessotherwisecredited.TheSIIAw

5、ouldliketothanktheHinrichFoundationfortheirgeneroussupportinmakingthisstudypossible.TheauthorswouldalsoliketothankHosukLee-Makiyama,Director of European Centre for International Political Economy(ECIPE)for hiscommentsonthispaper.1.IntroductionTheinternationalcommunityhasgalvaniseditselftocombatclima

6、techangeandlimitglobalwarmingwithcommitmentsembodiedintheParisAgreement.Throughnationallydeterminedcontributions(NDCs),eachstatecommitstoreduceitsemissionsofgreenhousegases.Asdevelopedanddevelopingnationshavedifferinglevelsofclimateambitionsandcommitmentsaredecidedbyeachstate,thereisaconsiderablevar