From a Latin American Perspective, what risks are involved in the Carbon Adjustment Mechanism (CBAM) for Latin America?
The main objective of this document is to discuss the risks that are involved in the Carbon Adjustment Mechanism (CBAM) for Latin America. The CBAM is a tax applied at the border to exports from developing countries to developed countries to compensate for the national carbon price. This CBAM tries to reduce problems of carbon leakage and competitiveness and to contribute to the deep decarbonization process. However, the CBAM has some problems. First, there is an ethical problem as it is applied to developing countries that produce inputs and goods for developed countries. Second, it has negative but heterogeneous effects on exports, economic dynamism, employment, and fiscal revenues in developing countries.
Collaborating institutions: Red Sur - UNAM
Author: Luis Miguel Galindo, UNAM, México
Support: IDRC, Canadá.