Description
The EU’s Carbon Border Adjustment Mechanim (CBAM) is rather an odd duck. On one hand, it responds to calls for the EU to act with a heavy hand, penalising carbon-intensive imports through a uniform carbon levy to offset internal carbon pricing under the EU Emissions Trading System. On the other hand, it is perforated with exceptions: it applies only to specific raw materials, sectors, and firm sizes, and may even exclude partners such as the United States. CBAM could therefore only emerge as a compromise. In this paper, we attempt to explain the mismatch between the lofty goal of creating an environmental club and the lowlands of achievable politics by analysing how adaptation costs and bargaining power shape member states’ positions. First, adaptation costs, driven by domestic carbon prices and trade exposure, should mitigate support for effective carbon pricing. Policymakers from states with high adaptation costs are expected to acquiesce to domestic opposition by resisting strong pricing measures, while policymakers from states with low adaptation costs are expected to advocate strong prices, reflecting domestic demand from firms already invested in carbon mitigation. Second, we expect that two political factors shape policymakers’ bargaining power. On one hand, industrial concentration within affected sectors amplifies political mobilisation: when adaptation costs or benefits are concentrated among a few firms, these actors have strong incentives to lobby and pressure policymakers. On the other hand, dependence on intra-EU trade weakens bargaining power by exposing policymakers to internal divisions. We test our argument through an automated text analysis of European Parliament debates (2016–2025). Our findings will contribute to the climate policy literature by demonstrating how collective action problems and bargaining considerations shape the arguments of EU policymakers.
