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Q109 (CAPF/2024) Environment & Ecology › Climate Change & Global Initiatives › Carbon pricing mechanisms

Which of the following statements about CBAM (Carbon Border Adjustment Mechanisms) is/are correct? 1. These are an emerging set of trade policy tools to allow movement of carbon-intensive economic activity from a jurisdiction having less stringent climatic policy to a jurisdiction having stringent climatic policy 2. These are meant to increase the environmental effectiveness of climate policies

Result
Your answer: —  Â·  Correct: B
Explanation

The Carbon Border Adjustment Mechanism (CBAM) is a trade policy tool designed to prevent 'carbon leakage,' which occurs when carbon-intensive production moves from jurisdictions with stringent climate policies to those with less stringent ones [1][3]. Statement 1 is incorrect because CBAM is intended to prevent, rather than allow, the movement of carbon-intensive activity to less regulated regions [3]. By imposing a carbon price on imports equivalent to domestic costs, it ensures that decarbonization efforts lead to actual global emission reductions rather than simple displacement [3]. Statement 2 is correct as CBAM aims to increase the environmental effectiveness of climate policies by addressing free-riding and ensuring that imported goods face comparable carbon costs, thereby encouraging greener production standards globally [1]. This mechanism protects industrial competitiveness while supporting the overarching goal of mitigating the global climate crisis [2].

Sources

  1. [1] https://pmc.ncbi.nlm.nih.gov/articles/PMC11103534/
  2. [3] https://www.gov.uk/government/publications/factsheet-carbon-border-adjustment-mechanism-cbam/factsheet-carbon-border-adjustment-mechanism
  3. [2] https://www.sciencedirect.com/science/article/pii/S030142152500521X?dgcid=rss_sd_all
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