Carbon Border Adjustment Mechanism (CBAM) to Tackle Carbon Leakage in the International Fertilizer Trade

Carbon emissions have negative effects on the climate regardless of the location they are generated, and several strategies were introduced to meet the Sustainable Development Goals, precisely, Goal 13 "Take urgent action to combat climate change and its impacts". Recently, to tackle the so-called carbon leakage, the European Union (EU) introduced the Carbon Border Adjustment Mechanism (CBAM), which is a crucial instrument to establish a fair price for the carbon emissions during the production of certain carbon-intensive goods, including fertilizers. The objective of this study is to assess the efficacy of the CBAM in addressing carbon leakage within the EU by evaluating the virtual carbon emission flows to the EU in the timespan 2019-2023, focusing on the top ten primary exporters of fertilizers. The assessment is based on the comparison of the world weighted average (WWA) emission factor and the country-specific one, to identify a more suitable method for measuring carbon emission flows. Results highlighted the opportunity of treating countries individually, rather than employing WWA emission factors. Emissions could be minimized by reducing production levels in countries with lax environmental policies, but this could penalize third-party economies. Sustainable development can be achieved by introducing fair environmental policies, maintaining constant production levels, economically compensating production economies, and exporting skills and know-how.