Climate Economics with Arvid Viaene
A research-focused podcast on the economics of climate change and air pollution. Episodes are released every two weeks on Tuesday at 6 am CET. Episodes will be either expert interviews or solo explorations of key issues. Hosted by Dr. Arvid Viaene, a climate economist with a PhD from the University of Chicago. He has done research on the impacts of climate change on agriculture and mortality. His research on climate-related mortality has been published in The Quarterly Journal of Economics, and he has advised the European Commission on the impacts of climate policy on firm competitiveness.
Climate Economics with Arvid Viaene
#18 Kimberly Clausing - The Global Effects of CBAM: Quantifying Benefits, Costs, and Leakage
Climate policy faces a built-in incentive problem: countries bear the costs of domestic regulation, while the benefits of lower CO₂ are shared globally. One proposed solution is a Carbon Border Adjustment Mechanism (CBAM) — charging imports a carbon cost comparable to domestic producers (with credits for carbon prices already paid abroad).
In this episode, I’m joined by Kimberly Clausing to discuss her paper on the global effects of CBAM, with a focus on steel and aluminium — two sectors that are both highly traded and emissions intensive. Using detailed plant-level data, the analysis quantifies impacts on welfare, competitiveness, leakage, and distribution across firms and countries.
We cover:
- Why CBAM is an answer to the free-rider / leakage / competitiveness triad — and what it can and can’t solve (domestic vs third-market competition).
- A key empirical surprise: emissions intensity is not tightly correlated with income per capita, which changes how we think about impacts on lower-income countries.
- “Two types of firms” logic: clean producers may benefit from access to a higher-price market, while dirtier producers may be pushed toward unregulated markets (with price effects abroad).
- Quantitative results: why welfare effects can be modest in magnitude, why CBAM shifts some burden from producers to consumers, and why CBAM revenue may be smaller than expected due to reallocation.
- Emissions outcomes: carbon pricing drives substantial reductions; CBAM can add incremental reductions and reduce leakage — especially when only one large jurisdiction acts.
- The “climate club” logic: how CBAM can make carbon pricing more politically feasible at home and more attractive abroad over time.
For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com