Economics & Development

This paper studies how firms respond to the announcement of the European Union’s Carbon Border Adjustment Mechanism (CBAM), focusing on Turkish manufacturing firms with substantial exposure to the EU market. Exploiting variation in firms’ pre-announcement exposure to CBAM-covered exports, the paper estimates difference-in-differences models using detailed firm–product–destination trade data. The findings show that more exposed firms exhibit relatively lower post-announcement exports of CBAM-covered products to the European Union (EU) and relatively higher exports to non-EU destinations, consistent with a market-switching response. These differences are economically meaningful: a one–standard deviation increase in exposure is associated with a 3.2 percent lower post-announcement level of CBAM exports to the EU and a 5.5 percent higher level of exports to non-EU markets. In contrast, the analysis finds no corresponding changes in export prices, suggesting that firms adjust quantities and destinations rather than pricing. The paper further shows that higher exposure is associated with a lower likelihood and lower levels of sourcing green investment inputs, relative to less exposed firms in the post-announcement period, both from foreign and domestic suppliers. This suggests that there is limited short-run adjustment along the green investment margin. Heterogeneity analyses show that export reallocation responses are stronger among larger and financially unconstrained firms, whereas adjustments along the green investment margin remain limited across firm types. Overall, the results suggest that, in the short run, firms respond primarily to the anticipated costs of CBAM by switching markets rather than upgrading production.

This memorandum provides the quarterly update of IBRD’s lending rates and spreads in line with the standard loan pricing set out in the Bank Policy and Directive Financial Terms and Conditions of Bank Financing. The Average Funding Spreads applicable to the IBRD Flexible Loan (IFL) for the period April 1, 2026 to June 30, 2026 have been determined based on the relevant reference rates and are as follows: EUR-denominated loans carry a positive spread of 11 bps, JPY-denominated loans a negative spread of 1 bps, and loans denominated in USD and other currencies a positive spread of 45 bps.

Ratings of the Beirut Critical Environment Recovery, Restoration and Waste Management Program for Lebanon were as follows: outcome was moderately unsatisfactory; Bank performance was moderately satisfactory; M&E quality was modest. Key lessons and recommendations include the following: Waste management and environmental recovery operations require longer implementation timelines due to complex permitting, stakeholder coordination, behavior change, and commissioning needs; future projects should schedule civil works with realistic contingencies to avoid missed deadlines and activity cancellations. In fragility, conflict, and violence settings, institutional approvals and coordination are often delayed; teams should establish contingency arrangements, confirm disposal options and site selection during preparation, and condition activities that depend on municipal or government approvals on securing those approvals upfront, with prompt restructuring if objectives become unachievable. For grant-financed operations, intensive and structured engagement with government stakeholders is critical to ensure ownership, permitting, and post-handover operations; this should include formal steering arrangements and dedicated focal points to keep approvals on track and reinforce accountability for operations after closing. Sustainability provisions must be embedded in implementation agreements, clearly defining post-project roles and responsibilities, financing mechanisms, handover processes, operation and maintenance requirements, governance and performance standards, monitoring and reporting obligations, escalation procedures for non-compliance, and review mechanisms, alongside commitments for budget allocation, cost-recovery strategies, and contingency plans to safeguard service continuity and asset preservation. Monitoring and evaluation should be integrated as a management tool rather than a reporting function, with indicators used to drive regular data collection, validate assumptions, guide course corrections, and trigger timely restructuring when warranted, including adjusting ratings, targets, or timelines and implementing corrective measures to maintain focus on achievable outcomes.

This Completion and Learning Review (CLR) assesses the World Bank Group’s (WBG) Country Partnership Framework (CPF) for the Republic of Indonesia for FY2021-2025. The CPF aimed to support Indonesia in achieving faster, inclusive, and sustainable growth through four engagement areas: (i) strengthen economic competitiveness and resilience; (ii) improve infrastructure; (iii) nurture human capital; and (iv) sustain management of natural assets, natural resource-based livelihoods and disaster resilience. These four engagement areas and overall strategic direction were reaffirmed in the FY24 Performance and Learning Review (PLR), with modest updates. The main adjustments included a shift in emphasis from economic recovery, which was particularly relevant immediately following the COVID-19 crisis, to longer-term measures for sustainable and inclusive growth. In the health sector, greater emphasis was placed on the Bank’s role in convening development partners and coordinating support for policy improvements as well as direct investments. Finally, investments in climate change and energy were scaled up, guided by the Country Climate and Development Report (CCDR). The overall performance of the CPF is rated Moderately Satisfactory in achieving targeted development outcomes. Progress was assessed across the 12 objectives and 40 results indicators. In three engagement areas, strengthening competitiveness, improving infrastructure, and nurturing human capital, performance was assessed as satisfactory as a large majority (80 percent) of the indicators met or exceeded their targets. The fourth engagement area, natural asset management, was assessed as moderately satisfactory as several indicators were partially or not achieved.