How much tax does the steel industry need to pay after the EU carbon tariff is officially passed?
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.
Fan Tiejun, President of the Metallurgical Industry Planning and Research Institute, told reporters: Although CBAM has been officially approved, the calculation method for the actual carbon emission price paid for steel products is not yet clear. After the implementation of CBAM, the carbon tariffs that China's steel industry needs to pay to the European Union every year cannot be accurately estimated, and can only be roughly calculated based on the materials we have and our understanding of the European Union's carbon market. Based on the CBAM rules that have been introduced, considering the annual amount of steel products exported from China to the European Union According to preliminary estimates such as the amount of steel exported to the EU in 2022, which is 3.89 million tons, the total amount of steel products exported to the EU (such as $6.44 billion in 2022), and the carbon price in the EU carbon market, the export cost of China's steel industry will increase by about 4-6%, and approximately $200 million to $400 million in carbon tariffs will need to be paid to the EU annually.
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.
Fan Tiejun, President of the Metallurgical Industry Planning and Research Institute, told reporters: Although CBAM has been officially approved, the calculation method for the actual carbon emission price paid for steel products is not yet clear. After the implementation of CBAM, the carbon tariffs that China's steel industry needs to pay to the European Union every year cannot be accurately estimated, and can only be roughly calculated based on the materials we have and our understanding of the European Union's carbon market. Based on the CBAM rules that have been introduced, considering the annual amount of steel products exported from China to the European Union According to preliminary estimates such as the amount of steel exported to the EU in 2022, which is 3.89 million tons, the total amount of steel products exported to the EU (such as $6.44 billion in 2022), and the carbon price in the EU carbon market, the export cost of China's steel industry will increase by about 4-6%, and approximately $200 million to $400 million in carbon tariffs will need to be paid to the EU annually.
