On December 15–16, 2025, the Bank of Italy, in collaboration with the European Central Bank and the World Bank, hosted the 4th Conference on “Trade, Value Chains and Financial Linkages in the Global Economy” in Rome. The event brought together leading researchers and policymakers to examine some of the most pressing challenges facing global trade and international production networks.
As part of the ENTICE project, researchers Alessia Campolmi and Chiara Forlati contributed to the program by presenting the paper “Designing Effective Carbon Border Adjustment with Minimal Information Requirements: Theory and Evidence.” The study tackles a central challenge in climate policy: unilateral carbon pricing can inadvertently trigger carbon leakage, as production shifts toward countries with less stringent environmental regulations. While instruments such as the EU’s CBAM seek to address this issue, they face substantial obstacles, including demanding information requirements, limited sectoral coverage, and the risk of heightened trade tensions.
The paper introduces a novel and fully implementable policy tool—the Leakage Border Adjustment Mechanism (LBAM)—which effectively neutralizes carbon leakage without requiring foreign emissions data and with minimal disruption to international trade. Drawing on a quantitative multi-country trade model, the authors compare alternative border adjustment mechanisms and highlight their trade-offs in terms of emission reductions, trade impacts, and welfare effects for both the EU and its trading partners. The paper is joint work with Harald Fadinger, Sabine Stillger, and Ulrich J. Wagner.