The Impact of the EU Carbon Border Adjustment Mechanism on Russian Exporters

Аннотация

The European Union’s commitment to achieve carbon neutrality by 2050 led EU states to develop a new legal stimulus mechanism allowing to reduce greenhouse gas emissions: the ‘Carbon Border Adjustment Mechanism’ (‘CBAM’). First introduced in July 2021, the CBAM anticipates an imposition of a special carbon import duty on companies that import certain goods and materials into the EU, with the amount of such duty calculated based on the amount of GHG emissions emitted into the atmosphere in relation to such products.

CBAM constitutes a part of today’s environmental agenda of the EU, but it obviously places additional financial burden on the shoulders of exporters, including those from Russia, for many of whom the EU has been a strategic market for a long period of time.

This article provides a summary of findings made as a result of research of available publications that addresses a potential impact of CBAM on the value and financial metrics of those Russian exporters. The authors aim to demonstrate the results of calculations of the additional burden placed on the exporters which arise from CBAM through an analysis of the structure of the export, identification of the economic sectors most affected by CBAM, calculation of a carbon export duty to be potentially paid at the border of the Eurasian Economic Union, as well as calculation of required government support for the exporters.
This article further evaluates the impact of CBAM while factoring in amendments that were still not covered in comprehensive research papers at the time of publication of the particular research analysed herein. Additionally, a detailed analysis of goods exported to the EU and impacted by CBAM is conducted for the first time, including a list of significant commodity nomenclature codes which are stipulated in the relevant legislation. Finally, recommendations on potential reactions to the impositions of CBAM and their effects on the future growth of the Russian economy are also provided.

In December 2021, the European Commission proposed a set of stringent amendments to the CBAM draft legislation, expanding the list of goods affected, broadening the emissions scope and accelerating the timeline for implementation of the CBAM. In June 2022 the European Commission agreed to compromise on less-stringent wording which goes outside the scope of this article. The details of proposed amendments assessed in this article thus represent the stricter version of language considered during the review process of the European Commission.