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CBAM Down-the-Line: An assessment of how CBAM will affect the competitiveness of downstream EU aluminium manufacturers

Litström, Erik LU (2025) In IIIEE Master Thesis IMEM01 20251
The International Institute for Industrial Environmental Economics
Abstract
CBAM aims to simultaneously drive EU competitiveness and decarbonisation by ‘levelling the
playing field’ for EU-based producers. However, as a form of carbon tariff CBAM risks
jeopardising downstream sectors’ competitiveness. This concern stems from CBAM charging
a carbon price on imported intermediaries which are used as inputs for downstream EU
manufactures. This carbon premium is not reflected in imported downstream products. This
results in EU downstream products being at a cost disadvantage to akin foreign imported
products. This artificial cost disparity is particularly concerning for the EU aluminium sector
which is both reliant on importing aluminium as input material and where downstream goods
account for the clear... (More)
CBAM aims to simultaneously drive EU competitiveness and decarbonisation by ‘levelling the
playing field’ for EU-based producers. However, as a form of carbon tariff CBAM risks
jeopardising downstream sectors’ competitiveness. This concern stems from CBAM charging
a carbon price on imported intermediaries which are used as inputs for downstream EU
manufactures. This carbon premium is not reflected in imported downstream products. This
results in EU downstream products being at a cost disadvantage to akin foreign imported
products. This artificial cost disparity is particularly concerning for the EU aluminium sector
which is both reliant on importing aluminium as input material and where downstream goods
account for the clear majority of the annual sector turnover. This thesis aims to investigate the
impact CBAM will have on the competitiveness of downstream EU aluminium manufacturers
through examining CBAM’s cost implications. The research deployed The Upstream Tariff
Simulator (UTAS), a tool commissioned by the World Bank which is based on an underlying
trade model using a simple partial equilibrium framework aimed at analysing tariff reform
scenarios. The model utilised official trade data from supranational and intergovernmental
organisations consisting of EU input-output tables, EU tariff schedule and a tariff reform
schedule incorporating CBAM. Through this, it was found that on average CBAM will
increase the cost of imported aluminium intermediaries by 7%, with several intermediaries
increasing in cost by 12-15%. With this, it is argued that the current CBAM layout will
negatively impact downstream competitiveness for the EU aluminium sector. These findings
facilitated a discussion on expanding the scope of CBAM to mitigate this negative impact on
downstream competitiveness. (Less)
Please use this url to cite or link to this publication:
author
Litström, Erik LU
supervisor
organization
course
IMEM01 20251
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Carbon Border Adjustment Mechanism (CBAM), Competitiveness, Aluminium, Downstream, Upstream Tariff Simulator (UTAS)
publication/series
IIIEE Master Thesis
report number
2025:08
ISSN
1401-9191
language
English
id
9209524
date added to LUP
2025-08-12 14:20:16
date last changed
2025-08-12 14:20:16
@misc{9209524,
  abstract     = {{CBAM aims to simultaneously drive EU competitiveness and decarbonisation by ‘levelling the
playing field’ for EU-based producers. However, as a form of carbon tariff CBAM risks
jeopardising downstream sectors’ competitiveness. This concern stems from CBAM charging
a carbon price on imported intermediaries which are used as inputs for downstream EU
manufactures. This carbon premium is not reflected in imported downstream products. This
results in EU downstream products being at a cost disadvantage to akin foreign imported
products. This artificial cost disparity is particularly concerning for the EU aluminium sector
which is both reliant on importing aluminium as input material and where downstream goods
account for the clear majority of the annual sector turnover. This thesis aims to investigate the
impact CBAM will have on the competitiveness of downstream EU aluminium manufacturers
through examining CBAM’s cost implications. The research deployed The Upstream Tariff
Simulator (UTAS), a tool commissioned by the World Bank which is based on an underlying
trade model using a simple partial equilibrium framework aimed at analysing tariff reform
scenarios. The model utilised official trade data from supranational and intergovernmental
organisations consisting of EU input-output tables, EU tariff schedule and a tariff reform
schedule incorporating CBAM. Through this, it was found that on average CBAM will
increase the cost of imported aluminium intermediaries by 7%, with several intermediaries
increasing in cost by 12-15%. With this, it is argued that the current CBAM layout will
negatively impact downstream competitiveness for the EU aluminium sector. These findings
facilitated a discussion on expanding the scope of CBAM to mitigate this negative impact on
downstream competitiveness.}},
  author       = {{Litström, Erik}},
  issn         = {{1401-9191}},
  language     = {{eng}},
  note         = {{Student Paper}},
  series       = {{IIIEE Master Thesis}},
  title        = {{CBAM Down-the-Line: An assessment of how CBAM will affect the competitiveness of downstream EU aluminium manufacturers}},
  year         = {{2025}},
}