Analysis of China's steel response ways to EU CBAM policy based on embodied carbon intensity prediction

The EU Carbon Border Adjustment Mechanism (CBAM) has decided to impose carbon tariffs on some imported goods after 2026 based on their embodied carbon emissions. And China, as the fourth largest steel importer in the EU, its foreign trade in steel will undoubtedly be affected. The Multi-regional Input-output and Single-regional Input-Output models were used to calculate the embodied carbon in China's steel exports to the EU from 2000 to 2020. Under the current development scenario, the EU carbon tariff rate in 2034 will reach about 5.5%, exceeding the average profitability of steel in recent years. In order to reduce carbon tariffs, a strategy to accelerate the development of carbon reduction capacity is proposed from the perspective of reducing embodied carbon. Meanwhile, considering the development trend of the tradable green certificate system and the controversial nature of CBAM in the WTO framework, a countermeasure to promote green certificates offsetting carbon tariffs is proposed from the policy perspective, and the cost increase rate generated by this measure is calculated with the scenario settings, and the cost increase rate is only 1.1% under the best situation.

Automated summary

The EU Carbon Border Adjustment Mechanism will impose carbon tariffs on imported goods, affecting China's steel trade. To reduce carbon tariffs, accelerating carbon reduction capacity and promoting green certificates offsetting carbon tariffs can be effective measures with low cost increase rate.