Leveraging Carbon Pricing Beyond EU Borders : Contrasting CBAM with Life Cycle Assessment and Circular Economy Strategies

Sammanfattning

The increasing use of trade-based climate policy instruments and carbon pricing has introduced new challenges for material- and energy-intensive industries. The Carbon Border Adjustment Mechanism (CBAM) represents a central component of the European Union’s climate framework, aiming to prevent carbon leakage by pricing emissions embedded in imported goods. At the same time, firms commonly rely on Life Cycle Assessment (LCA) to evaluate environmental performance across product systems, while Circular Economy (CE) strategies are promoted as key pathways for reducing resource use and emissions. However, the relationship between these approaches is not straightforward, raising questions about how emissions are defined, measured, and incentivised in practice. This thesis investigates how CBAM is interpreted and implemented, how its emissions accounting logic differs from LCA, and how CE strategies relate to CBAM incentives in material-intensive value chains. The study adopts a qualitative case study approach, combining document analysis, semi-structured interviews with regulatory, industry, and technical experts, and a quantitative LCA of a material-intensive product system. The analysis is based on methodological triangulation, enabling comparison between regulatory design, empirical modelling, and expert perspectives. The results show that CBAM affects firms beyond its formal scope. While applied to specific basic materials such as cement and steel, its effects extend through value chains via cost transmission, data dependencies, and regulatory uncertainty. Compliance depends not only on scope, but also on firms’ ability to access, structure, and verify emissions data across supply chains. At the same time, anticipated scope expansion creates uncertainty and requires firms to prepare for potential future inclusion. The comparison between LCA and CBAM reveals that differences are not merely methodological but conceptual. LCA evaluates environmental performance at the level of product systems, whereas CBAM quantifies regulatory carbon exposure linked to tradable goods. These differences are reflected in system boundaries, units of analysis, and the treatment of waste and indirect effects, leading to structurally different results. In the empirical case, emissions are distributed across multiple life cycle stages in the LCA, while CBAM-related calculations concentrate emissions in a limited number of carbon-intensive inputs. The analysis further shows that CE strategies are only partially aligned with CBAM incentives. While reduced material use and substitution may lower long-term carbon exposure, the mechanism does not directly reward broader circular performance, as it focuses on embedded emissions in defined goods rather than full life cycle outcomes. As a result, circular strategies remain indirectly linked to CBAM and depend on complementary policy frameworks and market conditions. Overall, the findings indicate a structural mismatch between environmental assessment, regulatory carbon accounting, and CE strategies. While LCA supports system-level optimisation of environmental performance, CBAM drives compliance-based optimisation of carbon costs in trade. This divergence implies that firms may face conflicting signals, where improvements from a life cycle perspective are not fully reflected in regulatory outcomes. This suggests that CBAM calculations should not necessarily be interpreted as a proxy for overall environmental performance or carbon leakage risk, as important environmental impacts may fall outside the mechanism’s accounting boundaries. This highlights the importance of integrating multiple analytical approaches when assessing environmental performance and regulatory exposure.