Carbon Tax and Leakage in the EU

The EU is worried that their carbon tax could hurt their domestic industry. So they now want to link trade policies with climate policies and introduce what's known as the Carbon Border Adjustment Mechanism or CBAM. The concept is simple: export goods back to your home base, but it doesn't really reduce carbon emissions in any way. It's merely transferred to a different location. Not only has the country lost its steel manufacturer, but it hasn't helped climate change in any way too.