Industrial European regions at risk within the Fit fo 55: How far implementing CBAM can mitigate?

The EU climate neutrality target requires substantial changes in the energy system, and the transition toward deep decarbonisation might adversely affect economic activities. The proposal to implement the Carbon Border Adjustment Mechanism (CBAM) aims to support this transition by putting a fair price on the carbon emitted during the production of energy-intensive goods imported to the EU, boosting the competitiveness of the European industries. While the current analysis of the implementation of the CBAM focuses mainly on the EU aggregated level or at the Member State level, there is a wide consensus that the fit for 55 package will impact sectors, groups, and geographical regions quite differently. In this study, we couple a CGE model (GEMINI-E3) with a GIS detailing 278 European regions (NUTS 2). We study the impact of the fit for 55 within different configurations on regional employment. In a scenario without CBAM, job losses would amount to 675’000 in 2030. Introducing CBAM with scope 2 would reduce them by 300’000. Nevertheless, we find that the impacts are different at the regional level and that this regional inequality must be taken into account when discussing social acceptability. The most exposed regions are the coal mining basins (e.g., Dytiki Makedonia, Slaskie, and Yugoiztochen), which historically have seen the development of heavy industry and regions that have specialized in energy-intensive industries are also impacted (e.g., Arnsberg and Rheinhessen-Pfalz). The social impact of these job losses must, however, take into account other factors: first of all, the situation of the local labor market, and second, the region’s capacity to adapt to this energy and industrial transition. We complete our analysis with an analysis of the vulnerability of each of the regions. Considering these other elements give a different picture. South European countries (Greece, Spain, and Italy) and new member states from central Europe (Bulgaria, Roumania, Czechia) are much more vulnerable. The European Union's challenge will be to support these vulnerable regions effectively. Dedicated to this objective, the “Just Transition Fund” is a new instrument of the European Cohesion Policy in the context of the European Green Deal. Our analysis shows that the fund must concentrate on building adaptive capacity instead of introducing compensating mechanisms that fail in the past to overcome territorial inequality.