On May 16, 2023, the text of the EU Carbon Border Adjustment Mechanism (CBAM, "carbon tariff") was officially published in the Official Journal of the European Union. This means that CBAM has become a formal law of the European Union. CBAM will officially take effect on the second day of the announcement, that is, on May 17, 2023. Along with CBAM, four other important carbon market regulations, including the EU ETS reform directive, were also announced.
The EU is the first economy in the world to impose a "carbon tariff". The EU introduced a "carbon tariff" to regulate the carbon emission burden of imported products, that is, to impose corresponding fees or quotas on imported products with higher carbon emission levels to save energy and reduce emissions and accelerate energy transformation.
The payment of "carbon tariff" fees is the responsibility of the unified executive agency established by the European Union. Importers can only import related products after obtaining import approval, and the fees will be settled uniformly from January to May of the second year. The scope of coverage includes steel, cement, aluminum, fertilizers, electricity, hydrogen, specific precursors, and certain downstream products.
EUThe impact of carbon tariffs on China
Carbon tariffs actually reduce the competitiveness of external export enterprises' goods. It is a new type of trade barrier, which will have many impacts on my country.
First, my country is the EU's largest trading partner and the largest source of commodity imports, and the largest source of implicit carbon emissions in EU imported goods. 80% of carbon emissions from my country's intermediate products exported to the EU come from metals, chemicals and non-metallic minerals, which are high-risk sectors for leakage in the EU carbon market. Once included in the carbon border adjustment, it will have a huge impact on exports; at the same time, a lot of research has been done on the impact of the previous EU CBAM. Under different data and assumptions (such as the emission range of imported products, the carbon emission intensity of related products and carbon prices), the conclusions will be quite different. In general, it is believed that 5-7% of China's total exports to Europe will be affected, and the CBAM sector's exports to Europe will decrease by 11-13%; the cost of exports to Europe will increase by about 100-300 million US dollars per year, accounting for 1.6-4.8% of the export value of CBAM-covered products to Europe.
But at the same time, we also need to see the positive impact of the EU's "carbon tariff" policy on my country's export industry and carbon market construction. Taking the steel industry as an example, there is a gap of 1 ton in carbon emissions per ton of steel between my country and the EU. In order to make up for this emission gap, Chinese steel enterprises need to purchase CBAM certificates. It is estimated that the CBAM mechanism will have an impact of about 16 billion yuan on my country's steel trade volume, increase tariffs by about 2.6 billion yuan, increase costs by about 650 yuan per ton of steel, and the tax burden rate is about 11%. This will undoubtedly increase the export pressure of my country's steel enterprises and promote their transformation to low-carbon development.
On the other hand, my country's carbon market construction is still in its early stages, and we are still exploring ways to reflect the cost of carbon emissions through the carbon market. The current carbon price level cannot fully reflect the pricing level of domestic enterprises, and there are still some non-pricing factors. Therefore, in the process of formulating the "carbon tariff" policy, my country should strengthen communication with the EU and reasonably consider the reflection of these cost factors. This will ensure that our industry can better cope with the challenges of "carbon tariffs" and also promote the steady development of our carbon market construction.
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