Carbon Border Adjustment Mechanism and the Protection of the Competitiveness of EU Aluminium Producers

The European Union 's decision makers placed in their agendas a very sensitive subject which was repeatedly tried in the past, that is to impose a carbon border tax. The advocates of such a measure use a mix of arguments, combining the urgency of fighting climate change through public policies with the need to protect the competitiveness of strategic sectors of the EU industry affected by the carbon leakage phenomenon. One of these sectors is that of aluminium production, which has felt the mounting pressure of the costs of indirect emissions reflected by the rising price of electricity in the last three years. Based on public statements and on studies prepared by both government institutions and academics, it seems that the EU wants to implement a carbon border adjustment mechanism (CBAM), and this should be in line with the WTO rules. Using a machine learning program, the author conducted a quantitative content analysis of the financial reports during 2018-2020 of five European aluminium producers. The author drew a number of conclusions regarding the correlations between the price increases of ETS certificates and the price of electricity reflected in the cost of production. Considering that CBAM will, in fact, be an extension of the ETS system applied to imported aluminium products, the author proposed a formula to measure the effectiveness of CBAM in order to achieve the proposed objectives of the European Parliament and European Commission, namely to protect the competitiveness of European companies and, at the same time, to help reduce the direct and indirect carbon emissions from the production process. The author considered the insufficiency of some of the necessary data, the still existing statistical asymmetries and some recent developments that may influence the results he has reached. Some of these methodological asymmetries will be addressed in future research.