Measuring the Cost of the European Union’s Carbon Border Adjustment Mechanism on Moroccan Exports

Abstract

The ‘Fit for 55’ policy package was presented in the European Commission’s Green Deal framework, comprising a set of proposals to improve existing energy and climate legislation. Among its main proposals was a revision of the European Union’s Emission Trading System to expand its sectoral coverage. Anticipating the possible loss of competitiveness with carbon pricing within the EU—which may lead to ‘carbon leakage’—a carbon border adjustment mechanism (CBAM) was included in the package. This scheme takes the form of an export tax levied by the European Union on some goods manufactured in non-carbon-taxing countries. In this paper, we provide a first-order estimate of the potential impact of CBAM on Morocco’s exports using an input–output approach. Our main findings suggest that the scheme would yield a carbon bill ranging from USD 20 to 34 million annually to Moroccan exporters in its initial phase. Morocco can mitigate such economic losses by instituting a national Emission Trading System, a tax reform, or speeding up the decarbonization of its economy.