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Carbon at the Gate: Evidence from the Transitional Phase of the EU’s CBAM

Freij, Hugo LU (2025) NEKP01 20251
Department of Economics
Abstract
To prevent carbon leakage and level the playing field between EU and foreign producers, the EU’s Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase in October 2023. Despite concerns abroad that CBAM would impose regulatory burdens, no study has causally estimated its impact on trade flows. Using monthly import data (Jan 2017– Dec 2024), I estimate a difference-in differences model. Coarsened Exact Matching is used to pair each treated EU importer–exporter with a comparable non-EU control. I find that reporting requirements under the transitional CBAM phase reduced covered imports by 34.4% (p< 0.01) for EU importers compared to non-EU importers, with parallel pretreatment trends being robust. The findings hold across... (More)
To prevent carbon leakage and level the playing field between EU and foreign producers, the EU’s Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase in October 2023. Despite concerns abroad that CBAM would impose regulatory burdens, no study has causally estimated its impact on trade flows. Using monthly import data (Jan 2017– Dec 2024), I estimate a difference-in differences model. Coarsened Exact Matching is used to pair each treated EU importer–exporter with a comparable non-EU control. I find that reporting requirements under the transitional CBAM phase reduced covered imports by 34.4% (p< 0.01) for EU importers compared to non-EU importers, with parallel pretreatment trends being robust. The findings hold across event-study specifications, placebo
tests, alternative samples and different matching variables. The effect appears short-lived and points to changes in trade patterns rather than production processes. These results highlight the significant trade-cost impact of CBAM’s reporting phase, and guide policy design for its definitive implementation in January 2026. (Less)
Please use this url to cite or link to this publication:
author
Freij, Hugo LU
supervisor
organization
course
NEKP01 20251
year
type
H2 - Master's Degree (Two Years)
subject
keywords
CBAM, Bilateral trade, Environmental policy evaluation, Coarsened Exact Matching, Difference-in-differences
language
English
id
9193720
date added to LUP
2025-09-12 10:53:11
date last changed
2025-09-12 10:53:11
@misc{9193720,
  abstract     = {{To prevent carbon leakage and level the playing field between EU and foreign producers, the EU’s Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase in October 2023. Despite concerns abroad that CBAM would impose regulatory burdens, no study has causally estimated its impact on trade flows. Using monthly import data (Jan 2017– Dec 2024), I estimate a difference-in differences model. Coarsened Exact Matching is used to pair each treated EU importer–exporter with a comparable non-EU control. I find that reporting requirements under the transitional CBAM phase reduced covered imports by 34.4% (p< 0.01) for EU importers compared to non-EU importers, with parallel pretreatment trends being robust. The findings hold across event-study specifications, placebo
tests, alternative samples and different matching variables. The effect appears short-lived and points to changes in trade patterns rather than production processes. These results highlight the significant trade-cost impact of CBAM’s reporting phase, and guide policy design for its definitive implementation in January 2026.}},
  author       = {{Freij, Hugo}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Carbon at the Gate: Evidence from the Transitional Phase of the EU’s CBAM}},
  year         = {{2025}},
}