Title page 1

Contents 1

Abstract 2

1. Introduction 3

2. Methods 4

2.1. The ICES Model 4

2.2. Baseline Calibration 6

3. Scenarios 6

4. Results 8

4.1. Economy-Wide Effects 8

4.2. Carbon Leakage 9

4.3. Sectoral Effects 10

5. Conclusions 18

Appendix 19

References 26

Table 1. NDC mitigation targets by country and club coalitions 7

Table 2. Intervention offering the best result (lower contraction in sectoral production, lower increase in net imports) by country/macro-region, sector,... 16

Table 3. Regional and sectoral mapping 25

Table 4. Main elasticity values in the Intertemporal Computable Equilibrium System (ICES) model 25

Figure 1. Intertemporal Computable Equilibrium System model production tree 5

Figure 2. (a) Total CO₂ emissions, carbon intensity of GDP in 2015, (b) absolute emission reduction 2015 to 2030, (c) percent emission reduction in 2030... 7

Figure 3. GDP variation and carbon price in 2030 by club and policy variant 9

Figure 4. Leakage rate by club and leakage decomposition by country emissions 10

Figure 5. Policy effects, and effects of carbon border adjustment mechanisms (CBAM) and rebates implementation on production of chemicals (left)... 13

Figure 6. Policy effects, and effects of carbon border adjustment mechanisms (CBAMs) and rebates implementation on the production of iron and steel (left)... 14

Figure 7. Policy effects, and effects of carbon border adjustment mechanisms (CBAMs) and rebates implementation on production of non-metallic minerals and... 15

Figure 8. Net effect of technological spillovers on the effectiveness of carbon border adjustment mechanisms (CBAM) and rebates. Percent change in production and... 17

Figure 9. Change in world emissions by club configuration and policy variant 19

Figure 10. Spillovers' net effect of policy instruments on the carbon intensity of GDP 19

Figure 11. Policy effects, and effects of carbon border adjustment mechanisms (CBAMs) and rebates implementation on production of chemicals and... 20

Figure 12. Policy effects, and effects of carbon border adjustment mechanisms (CBAMs) and rebates implementation on production of paper and pulp and... 21

Figure 13. Policy effects, and effects of carbon border adjustment mechanisms (CBAMs) and rebates implementation on production of iron and Steel and... 22

Figure 14. Policy effects, and effects of carbon border adjustment mechanisms (CBAMs) and rebates implementation on production of non-ferrous metals and... 23

Figure 15. Policy effects, and effects of carbon border adjustment mechanisms (CBAMs) and rebates implementation on production of non-metallic minerals and... 24