Has EU ETS caused carbon leakage in the EU carbon-intensive industries?A study from the perspective of bilateral trade

Reducing carbon leakage is one of the important reasons that was put forward by the EU for their border adjustment tax proposal.However,there are not many empirical evidences supporting significant carbon leakage in the EU carbonintensive industries.This paper applied the structural breakpoint test for the time series of import and export of cement,aluminum,and steel between EU and China.No significant structural changes were detected in the import and export of cement and aluminum.However,there proved to be two breakpoints,i.e.,2003 and 2008,in the import and export of steel,in which at the second point the overall level of steel import increased.Furthermore,Granger causality test was applied to the carbon price from European Climate Exchange and the import and export of steel.It was found that the carbon price was the Granger cause for the changes of steel import,but not the Granger cause for the export.The results of the study showed that the impacts of EU ETS on the EU carbon-intensive industries were limited.Among the three industries,partial evidence of carbon leakage was only found in the steel industry.Therefore,reducing carbon leakage could not serve as a convincing justification for border adjustment tax.