How much tax does the steel industry need to pay after the EU carbon tariff is officially passed?


Release time:

2023-06-24

The public opinion on EU carbon tariffs has once again heated up.

Recently, the European Council voted to approve the Carbon Border Adjustment Mechanism (CBAM). This marks the completion of the entire legislative process and the formal adoption of CBAM. This heavyweight news has once again heated up the public opinion on EU carbon tariffs.
CBAM involves six major industries, namely steel, cement, aluminum, fertilizers, electricity, hydrogen, and indirect emissions under specific conditions. The importers of these products must pay the difference between the carbon price paid by the producing country and the carbon quota price in the EU carbon emissions trading system.
Among them, the steel industry, as an energy intensive industry, is the industry with the highest carbon emissions among the 31 categories of manufacturing industry, and is the industry with the largest total export volume to Europe among these six products in China. In this context, the impact of CBAM implementation on it has become a topic of concern for many people. To this end, the reporter conducted in-depth interviews with relevant experts.
The export cost of China's steel industry may increase by about 4% -6%
Roughly calculated: $200 million to $400 million
CBAM has received much attention globally, and one important reason is that it is the "first crab eating" mechanism - the world's first "carbon import tax". Its implementation means that non EU producers who want to sell goods in the EU in the future must pay for carbon dioxide emissions. This plan will begin trial operation in October 2023 and be implemented in stages between 2026 and 2034. At this point, the EU will become the world's first economy to impose carbon tariffs.
That is to say, CBAM will take effect on October 1st of this year, but there will be a transitional period until the end of 2025. During this period, when Chinese enterprises export products to the European Union, they need to report product carbon emissions information, but do not need to pay a fee. Starting from January 1, 2026, they will need to pay carbon tariffs, and the price will be linked to the European carbon emissions trading system.
The implementation of carbon tariffs is already highly controversial within Europe. According to the German newspaper Le Monde on the 19th, CBAM is the beginning of environmentally friendly trade for some people, but others are concerned that the latest EU measures may push up the prices of thousands of products. Industry warnings suggest that certain products may become more expensive.

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