The impact of Carbon Border Adjustment Mechanism on EU trade: modeling strategies for alternative sourcing

The thesis analyses the effects of the Carbon Border Adjustment Mechanism (CBAM) on European imports, with a detailed focus on the iron \& steel sector. The topic is relevant to climate policy and supply chain management, as CBAM intersects regulatory constraints, carbon prices and competitive risk in international markets. The analysis investigates the impact of CBAM not only by sector but by individual product code and exporting country. The purpose is to quantify the economic and environmental implications of the introduction of CBAM and to evaluate adaptive strategies for importers and policy-makers. To this end, Eurostat trade data for 2024 (quantity and value per CN code and partner) were extracted and combined with emission intensity values (default and country-specific). A punctual selection of the EU ETS price (69,92 €/tCO$_2$) was defined, and simulations were implemented with the purpose of capturing uncertainty, performing sensitivity analyses, in addition, a composite index of vulnerabilities and linear optimization models was built in GAMS to test alternative sourcing scenarios. The choice to focus the analysis on the iron \& steel category derives from its relevance in terms of volumes and value and its high impact potential. Simulations were conducted on two codes: 720212 and 7208, comparing a base scenario and three alternative scenarios: ETS price shock, convergence of emission intensities towards EU values and supply shifting with optimization of the supply mix. The results show a strong heterogeneity of impact at the code - country level: the incidence of CBAM depends on the mix of suppliers, emission intensities and sales prices. EI convergence tends to generate relevant environmental and, sometimes, economic benefits; supply shifting with sourcing optimization reduces cost and emissions when alternative low EI providers exist, while the benefits are limited for codes heavily focused on a single provider. Sensitivity analyses indicate that the relative importance of ETS, quantity, unit price and EI varies between countries, orienting different priorities for intervention. Overall, the need for a combined approach emerges: diversification of supplies, targeted investments in decarbonisation and carbon price risk management tools.