The Potential and Distributional Effects of CBAM Revenues as a New EU Own Resource

Carbon Border Adjustment Mechanism (CBAM) revenues are increasingly being discussed as a potential new EU own resource. The aim of this paper is to quantify the revenue potential of the CBAM for the EU budget until 2035. Furthermore, this paper examines the distributional implications of CBAM revenues for Member States. It proposes a methodology to quantify the revenue potential of CBAM and calculates a number of revenue scenarios. The distribution of CBAM revenue among all Member States is compared with the distribution of the GNI-based resource in order to illustrate the distributional effects. According to these results, the annual revenue potential of the CBAM is of the order of <euro>1 billion in the first years after its introduction, rising to around <euro>14 billion by 2035. The distributional effects compared to GNI proportionality are small. The scenario analysis shows the sensitivity of the CBAM revenue forecasts, as they depend crucially on various parameters.