The impact of the implementation of EU’s Carbon Border Adjustment Mechanism on North Macedonia

Investment Rating - The report does not explicitly provide an investment rating for the industry under discussion. Core Insights - The implementation of the EU's Carbon Border Adjustment Mechanism (CBAM) is expected to impact North Macedonia's economy, particularly in sectors with high carbon emissions such as cement, aluminum, iron, and steel [7][9][10] - The CBAM aims to address carbon leakage by imposing a carbon price on imports from countries without comparable carbon pricing policies, with full implementation expected by 2026 [8][10] - The World Bank's MINDSET model projects a decline in exports to the EU, particularly in the aforementioned sectors, with an overall economic output decline of less than 0.3 percent [10][28] - Specific sectors like aluminum and steel may experience output losses close to 2 percent, while other sectors may see losses of around 0.5 percent or less [11][30] - The introduction of CBAM could lead to approximately 1,500 job losses in North Macedonia, primarily affecting the manufacturing sector [11][37] Summary of the CBAM Regulation - The CBAM will initially cover imports of carbon-intensive goods at high risk of carbon leakage, including cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen [20] - The regulation operates on a declarative basis, requiring EU importers to report verified GHG emissions associated with imported goods [20][21] - The CBAM will be implemented in phases, with a transitional period from October 2023 to December 2025, followed by a fully operational period starting January 2026 [21][22] Implications of the CBAM Regulation in North Macedonia - The economic implications of the CBAM for North Macedonia vary across products and sectors, with expected effects depending on production processes and trade dynamics [24] - The MINDSET model simulates impacts under various scenarios, indicating that North Macedonia's economy could face a slight decline in output and employment due to reduced exports to the EU [26][28] - The sectors most vulnerable to the CBAM include metal-producing industries, which account for a significant portion of North Macedonia's exports to the EU [27][39]