The Economic Impacts of Carbon Border Adjustment Mechanism on International Trade and Developing Countries

Abstract

Against the backdrop of intensifying global climate change and tightening carbon emission reduction policies worldwide, the Carbon Border Adjustment Mechanism (CBAM) represented by the EU has gradually become an institutional tool reshaping international trade rules and industrial division of labor. It integrates full life-cycle carbon emissions into trade costs and promotes global industrial decarbonization by internalizing carbon externalities. This paper investigates the effects of CBAM on international trade flows and developing economies by analyzing carbon cost transmission, shifts in global competition, and industrial restructuring based on policy documents and existing literature. The study finds that CBAM increases export costs for high-carbon products, reshapes global competition, promotes green industrial transformation, phases out high-carbon sectors, and helps reduce carbon leakage. Nevertheless, uneven levels of development and emission reduction capacities intensify the transition pressures and trade inequalities faced by developing countries. In response to CBAM-related challenges, developing countries need to enhance industrial upgrading, technological innovation, and international cooperation to achieve low-carbon transformation and sustainable development.