The introduction of the mechanism could have a serious impact on Chinese steel and aluminum producers
The EU's decision to impose a tax on carbon-intensive imports under the carbon border adjustment mechanism (CBAM) from 2026 could seriously affect Chinese steel and aluminum producers. This is investment bank Goldman Sachs' assessment in its report, the South China Morning Post reported .
Goldman analysts estimate that from 2026 the steel tariff under the CBAM for China will reach 6%, in 2032 it will increase to 21%. Although China and India consider the tax a protectionist measure, it is part of the European Union's policy to achieve zero carbon emissions by 2050.
As for aluminum, the rate for Chinese exporters could start at 3% and then increase to 7% in 2032.
The CBAM aims to level the playing field for producers of carbon-intensive goods in the EU as free emission allowances under the EU ETS are gradually phased out.
The exact amount of import duties has not yet been determined, as it will vary depending on the carbon price prevailing under the EU ETS and offset by a carbon tax that China will impose on its emissions-intensive sectors by 2026.
So far, Beijing has only imposed cap-and-trade obligations on electricity producers. The regime could be extended to the aluminum, cement and aviation sectors by 2025, and to the steel, chemical, paper and glass industries by 2030.
Baoshan Iron&Steel, Citic Pacific Special Steel, Nanshan Aluminum and Dingsheng New Materials are among the exporters with the highest potential turnover covered by CBAM, the bank's analysts said.
Goldman's estimates are based on an EU carbon price of $70/t in 2026 and the assumption that industry emissions intensity will remain unchanged until then.
According to Goldman analysts, around $45 billion worth of goods subject to CBAM were exported from the Asia-Pacific region to Europe in 2022, representing 4% of the region's total exports.
China will be hit hardest by future tariffs. In 2022, Chinese carbon-intensive goods subject to CBAM were valued at $20.5 billion, compared to $8.7 billion for India and $4 billion for the US. However, Indian steel exporters are expected to be subject to higher tariffs as their production process is more carbon intensive compared to China.
It is recalled that India plans to oppose the European carbon tax on imports (CBAM) at the next World Trade Organization meeting, to be held at the end of February. The country intended to claim that this would become a new trade barrier.
