General

The recently passed "World Earth Day" has once again raised people's attention to global climate change. Especially in the field of foreign trade, the European Parliament has passed the Revised Carbon Border Adjustment Mechanism (CBAM), which means that the world's first carbon tariff is one step closer to its implementation. CBAM will also become the world's first mechanism to respond to global climate change in the form of carbon tariffs. It is understood that CBAM must obtain formal approval from the European Council and be published in the Official Journal of the European Union, with effect 20 days after its publication.

According to data released by the Eurostat, the trade volume between the 27 EU countries and China in 2022 was 856.3 billion euros, a year-on-year increase of 22.8%. Among them, the EU imported 626 billion euros from China, an increase of 32.1%. China will become the second largest trading partner and largest source of imports for the European Union in 2022. If calculated based on last year's data, China should be the largest source of implicit carbon emissions from EU imports.

In the short term, the introduction of the EU CBAM has limited impact on China's international trade exports. Currently, the export volume of related products covering industries to Europe is not large. With the promotion of carbon tariffs, its impact will also be transmitted to the upstream and downstream of these industry chains. "said Hu Qimu, the first researcher at China Steel Economic Research Institute.

The European Parliament announced that the products covered by CBAM include iron, steel, cement, aluminum, fertilizers, electricity, hydrogen, and indirect emissions under certain conditions. In addition, downstream products such as screws and bolts and similar steel products will also be included.

From the perspective of product structure, China's advantageous exports to the European Union in 2022 are mainly concentrated in categories such as motors, mechanical appliances, vehicles, furniture and lighting fixtures, organic chemicals, toys, clothing, plastics, instruments and equipment. The international trade export value of these goods accounts for 72.85% of the total export value to the European Union. However, as CBAM promotes the withdrawal of free quotas from the EU carbon market, it will gradually affect the products imported by the EU from its own country. According to the Huasheng Green Industry Development Research Institute, the implementation of CBAM will increase the costs of Chinese enterprises exporting to the European Union by 6% to 8%.

From a longer-term perspective, CBAM may only be a starting point, not an endpoint. Driven by the demonstration of the European Union, the process of countries such as the United States and Canada introducing their own carbon tariff mechanisms will also accelerate. Regarding this, Hu Qimu analyzed that if international trade export enterprises do not take proactive measures to reduce carbon emissions, it will lead to an increase in the prices of their export products and also drive downstream product prices in related industries to a certain extent. To some extent, CBAM will force exporters to reduce carbon emissions, thereby achieving transformation and upgrading.

According to Wang Jian, a member of the Expert Committee of the China Council for the Promotion of International Trade and a professor at the University of International Business and Economics, the launch of CBAM may change the trade pattern and accelerate the process of green trade. He said that in the future, all parties may need to conduct carbon measurements on various aspects of goods production, processing, circulation, and so on. "Just like food has ingredient lists and household appliances have energy-saving tables, goods need to be labeled with relevant carbon reduction information.

In fact, the performance of Chinese enterprises in green and low-carbon areas is also two sides of the same coin.

On the one hand, China is currently a world leading manufacturer and exporter of various green technologies. Data shows that China is a leading global supplier of electric vehicles, accounting for 40% of the world market share; China's share in the wind turbine market is 40%; 35% share in the green hydrogen energy market; China supplies about 80% of the world's solar panels... From the perspective of the carbon rich steel industry, large enterprises such as Baowu and internationally renowned companies such as Rio Tinto are collaborating on low-carbon ironmaking projects and research to reduce carbon emissions.

On the other hand, although China has implemented the concept of green and low-carbon development early on and explicitly proposed the "dual carbon" goal in 2020, and the national carbon market officially opened in 2021, there are still many difficulties in further improving the national carbon market and aligning it with the international standards. Wang Jian said, "This requires more Chinese enterprises to establish a green and low-carbon awareness. On the one hand, the Chinese government needs to guide the transformation and upgrading of enterprises in the form of the market, especially the carbon market. On the other hand, it also needs to learn from the corresponding rules of the European Union and use them to promote enterprise emission reduction and carbon reduction

Enterprises that are in a leading position in the process of green and low-carbon transformation may face new opportunities. For enterprises with high carbon content, especially large enterprises, it is easier to cooperate with upstream and downstream industries to achieve green upgrading. The key is that small and medium-sized enterprises have weaker strength, and in this regard, they may need to make more efforts on their own, and government departments should also provide more help. "Hu Qimu suggests that in the short term, International trade export enterprises can use the transition period of CBAM to delay or reduce carbon tariff payments, but in the long run, transformation and upgrading, and continuously improving carbon management capabilities are the only way for enterprises to respond to carbon tariff mechanisms such as CBAM. He also suggested that government departments should conduct training, provide public welfare knowledge services or technical services, guide SMEs to participate in carbon reduction in the industrial chain supply chain led by large enterprises, make good use of green finance tools and other aspects to help SMEs achieve green and low-carbon transformation and upgrading, so as to help enterprises better conduct international trade.