preventing carbon leakage, incentivising the uptake of cleaner technologies abroad and creating a level playing field for both local and foreign producers. However, these additional charges on imposed could affect the export competitiveness of several countries in the Asia-Pacific region, Commonwealth countries in particular. Of the member states of the Economic and Social Commission for Asia and the Pacific (ESCAP) 19 are from the Commonwealth, and many of these countries are global supply chain hubs which link Asia and the Pacific with major consumer markets in the West.
A recent study conducted by the Commonwealth Secretariat found that South Asian economies rely greatly on the EU market, with CBAM-related exports worth US$40 billion being sent from South Asian countries in 2019. Around 14 per cent of them were exported to the EU. India accounted for over 80 per cent of these exports, followed by Malaysia, at around 15 per cent. The study also showed that in the Pacific, Australia and New Zealand, would be moderately affected with only 3 per cent of the US$15 billion exports from the targeted sectors being sent to the EU in 2019. However, this share could expand considerably, if the carbon tariffs are extend to emissions from other sectors such as transport and agriculture.
Accordingly, experts call on the EU to also consider the differential responsibilities and respective capabilities of countries under the Paris Accord, as part of its efforts to minimise greenhouse gas emissions. “The macroeconomic effects of the proposed CBAM and the prospects of similar policies by other developed countries point to the need for greater coherence between the multilateral trade and environmental regimes to tackle climate change,” experts from the Commonwealth Secretariat and the ESCAP said in a statement.
