Background Note 3 - Potential Exposure and Vulnerability to Broader Climate-Related Trade Regulations - An Illustration for LAC Countries

Jul 19, 2026

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The manuscript examines carbon border adjustment (CBA) mechanisms and proposed import bans on deforestation-free products (DFP) by the EU, the US, and other countries. It quantifies both exposure—measured as the share of exports potentially affected—and vulnerability for Latin American and Caribbean (LAC) countries using embedded emissions intensity, deforestation risk, and export-market concentration. Results show exposed export shares are under 0.4% for the EU-CBA, under 17% for the EU-DFP proposal, and under 6% for the US-DFP bill, with policy implications for widening scope and for public action on data provision.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages38

Reading Time1 h 36 min

AccessFree to download

Introduction

Exposure of LAC countries to climate-related trade regulations

Product scope definition and data

LAC countries’ exposure

Broader climate-related trade regulations

Product selection processes in the EU

LAC countries’ exposure to broader climate-trade related EU regulations

Vulnerability: embedded emissions, deforestation risk and exports’market concentration

Comparative emissions’ intensities

Deforestation risk

Export markets’ concentration

Conclusions

References

Appendix 1. Details referred to data

Appendix 2. Supplementary material

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November 3, 2022 | | | Table of Contents 1. Introduction................................................................................................................3 2. Exposure of LAC countries to climate-related trade regulations ...............................6 2.1. Product scope definition and data ........................................................................................8 2.2. LAC countries’ exposure .........................................................................................................9 3. Broader climate-related trade regulations ............................................................. 13 3.1. Product selection processes in the EU ............................................................................... 13 3.2. LAC countries’ exposure to broader climate-trade related EU regulations ...................... 15 4. Vulnerability: embedded emissions, deforestation risk and exports’market concentration .................................................................................................................... 18 4.1. Comparative emissions’ intensities.................................................................................... 18 4.2. Deforestation risk ................................................................................................................ 21 4.3. Export markets’ concentration............................................................................................ 22 5. Conclusions............................................................................................................. 24 6. References .............................................................................................................. 27 Appendix 1. Details referred to data................................................................................. 29 Appendix 2. Supplementary material ............................................................................... 35 Background Note 3. Potential exposure and vulnerability to broader climate-related trade regulations: an illustration for LAC countries Prepared by Mariana Conte Grand, Paulina Schulz-Antipa and Julie Rozenberg This manuscript looks at carbon border adjustments (CBA) mechanisms and bans to imports of deforestation-free products (DFP) recently proposed by the EU, the US, and other countries. It aims to answer three questions: What is the exposure (computed in terms of share of exports potentially affected) and vulnerability of Latin American and Caribbean (LAC) countries (as measured by countries’relative emissions’ intensity, risk of deforestation and exports’ concentration) to those regulations? How could they be broadened along commodities and across countries and what would be the consequences? What could be policy responses in LAC countries to adapt to the new rules? Using data from the World Integrated Trade Solutions database (WITS) , we find that the share of exposed exports in LAC countries’ is under 0.4% for the EU-CBA, it is under 17% for the EU-DFP proposal and under 6% for the US-DFP bill. Overall, CBA regulations would be milder than DFP ones, because of the productive profile of the region, more inclined to agricultural than to industrial production. For CBA, the EU rules would have a more severe impact than the US ones, and the other way around for DFP. If other countries with CBA plans adopt CBA, the impact would be small because the EU and the US are the destination of 45% and 8% of LAC exports, r

FAQs

What trade-climate restrictions are analyzed in Background Note 3?

The note studies EU and US carbon border adjustments (CBA) and proposed import bans on deforestation-free products (DFP). It also considers similar regulations proposed by other countries.

How does vulnerability get assessed in the report?

Vulnerability is assessed through embedded emissions intensity, deforestation risk, and the concentration of export markets. It highlights how emissions profiles and lack of lower-emissions competitors can affect outcomes for specific products and countries.

What does the report conclude about the potential impact of broadening EU rules?

Broadening the EU-CBA scope increases its impact to up to 14% of exports, while expansion of the EU-DFP has marginal consequences. The note also indicates that EU and US destination shares constrain overall impact if other countries adopt similar CBA plans.

Jul 19, 2026

Upload by Noah