The European Union's Carbon Border Adjustment Mechanism (CBAM) enters into full implementation today, marking the world's first “carbon tariff”-focused climate trade policy. The CBAM is the world's first climate trade policy centered on a “carbon tariff”. The mechanism aims to ensure fair competition between EU domestic industries and high-carbon imports by levying a carbon price differential on imports, and at the same time accelerate the decarbonization of the global industrial chain.

Core content of CBAM

CBAM initially covers six major high-carbon industries, namely steel, aluminum, cement, fertilizer, electricity and hydrogen, and may be gradually extended to other areas in the future. Importers are required to declare the direct and indirect carbon emissions in the production process of their products and purchase the corresponding certificates according to the carbon price of the European Union's Emissions Trading System (ETS). If the exporting country has implemented the carbon pricing mechanism, enterprises can offset the cost with the actual payment of certificates.

Impact on the European market

1. Local industry protection: EU companies have long been subject to stringent carbon emissions regulations, and CBAM will eliminate the cost advantage gained by overseas competitors due to lax climate policies, especially benefiting key industries such as steel and chemicals in Europe.

2. Rising consumer costs: Analysts predict that the prices of some imported goods may rise by 5%-20%, which will eventually trickle down to the end market and exacerbate inflationary pressures.

3. Supply chain restructuring: European buyers may turn to low-carbon suppliers, forcing emerging market countries to accelerate investment in clean technology.

International Reactions and Controversies

- Developing countries protested: India, Brazil and other countries criticized CBAM as a “green trade barrier”, which may violate WTO rules and exacerbate economic inequality between North and South countries.

- U.S. Cautiousness: Although the Biden administration has proposed a “climate club” of sorts, it is clearly opposed to unilateral carbon tariffs, raising the risk of trade friction between the U.S. and Europe.

- China's response: As one of the EU's largest trading partners, China has accelerated the establishment of a national carbon market and explored a mutual recognition mechanism for carbon pricing with the EU.

Expert Opinion

According to Sandbag, a European climate think tank, “CBAM is a key tool for the EU to achieve carbon neutrality by 2050, but its success depends on international cooperation. Future technical assistance and financial support will be needed to help developing countries with their low-carbon transition.”

The implementation of CBAM is not only an environmental policy, but also a new battleground for geo-economic games. With the end of the transition period in 2026, global trade rules may usher in a more far-reaching “green remodeling”. Enterprises need to pay close attention to the policy dynamics and layout carbon accounting and emission reduction technology in advance to cope with the new round of competition.