Journal of Finance and Economics
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Journal of Finance and Economics. 2023, 11(3), 131-141
DOI: 10.12691/jfe-11-3-1
Open AccessArticle

Analysis of the Relationship between International Trade and Carbon Border Adjustment Mechanism

Yen-Hui Kuo1, 2, and Shu-Ching Chou2,

1Taichung Customs Administration, Ministry of Finance, Taichung 43501, Taiwan

2Department of Finance, National Yunlin University of Science & Technology, Yunlin 64002, Taiwan

Pub. Date: July 12, 2023

Cite this paper:
Yen-Hui Kuo and Shu-Ching Chou. Analysis of the Relationship between International Trade and Carbon Border Adjustment Mechanism. Journal of Finance and Economics. 2023; 11(3):131-141. doi: 10.12691/jfe-11-3-1


The European Union (EU) Carbon Border Adjustment Mechanism (CBAM) is a crucial tool that aims to connect carbon reduction commitments with international trade. It encourages countries to align their carbon emissions with EU standards, design reasonable carbon taxation systems, and stimulate investment in clean technologies to achieve global decarbonization goals. The implementation of CBAM in 2026 will have a direct impact on the global supply chain, including Taiwan’s export-oriented enterprises. This article aims to explore the relationship between the CBAM and international trade. CBAM not only encourages countries to demonstrate their commitment to carbon reduction and align their carbon emissions with EU standards, but it also guides governments in designing reasonable carbon taxation systems and incentivizes businesses to invest in clean technologies to achieve global decarbonization goals. This study uses a regression model to analyze how international trade and other economic variables relate to CO2e emissions of multinational companies in Taiwan. The findings reveal strong positive associations between Taiwan’s carbon emissions and variables like metal production, construction, fixed investment, land value tax, steel industry profitability, and annual export trade growth rate. Conversely, a significant negative association is observed in variables like electronic component production, number of employees in power machinery manufacturing, and Indices of Consumer Price in Taiwan area-food away from home. This indicates that Taiwan’s electronic, semiconductor and power machinery industries have effectively achieved environmental benefits through the adoption of cleaner production technologies. Overall, this research contributes to facilitating low-carbon transformations within businesses and the formulation of policies that attract international orders, highlighting the importance of CBAM in promoting global sustainability.

carbon border adjustment mechanism export trade fixed investment consumer price index electronic components industry

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