The negative impact of unilateral implementation of carbon border tax by the European Union is evident

The European Union Carbon Border Adjustment Mechanism (CBAM), also known as the "Carbon Border Tax," was officially launched on October 1st this year and has entered a transitional phase. The EU plans to officially levy taxes starting from 2026, raising the import threshold according to the EU's carbon emissions trading system. At that time, products exported to the EU will face relevant emission taxes. Although this move is aimed at promoting the development of green technology, it inevitably carries the suspicion of market protection and may violate the principles of the World Trade Organization. The EU itself acknowledges that carbon border taxes have a dual purpose, namely to maintain European industrial competitiveness and encourage other countries to adapt faster to the EU's green policies.
The EU regards the implementation of a new carbon border tax as an important step towards achieving its emission reduction goals. The goal is to reduce net greenhouse gas emissions by at least 55% compared to 1990 levels by 2030. Although the European Commission claimed in its policy formulation that CBAM is a measure compatible with WTO rules, encouraging global industry to adopt more environmentally friendly and sustainable technologies. However, the negative impact of unilaterally raising the tariff threshold is evident.
Firstly, EU green protectionism has attracted widespread criticism.
The main trading partners of the European Union, such as the United States, China, India, Brazil, South Korea, South Africa, and other Asian, African, and Latin American countries, have all stated that unilateral EU taxation is a form of "disguised green protectionism". The imposition of a carbon tax by the European Union will further complicate international trade and increase the export costs of non EU manufacturers. In addition, EU consumers will also face higher import prices, as CBAM related reporting obligations may bring higher costs that may have to be passed on to consumers.
According to research by Boston Consulting, industries such as automobiles, construction, packaging, and consumer electronics may be the most severely affected downstream, as these industries are the largest users within the scope of CBAM regulations. Boston Consulting said that it is expected that by 2032, the cost of steel imports from the United States and the United Kingdom by the European Union may rise by 6%, imports from Türkiye by 10%, imports from South Korea by 12%, imports from China by 17%, and imports from India by 32%. From the perspective of India, compared to its European counterparts, Indian companies have higher emission intensity, and their position as a major low-cost aluminum producer may be severely weakened. That is to say, once the EU officially imposes a carbon tax, and India is unable to keep up with the EU's emission reduction requirements, its product export prices will become very expensive. On the contrary, producers within the EU region can reduce the burden of CBAM due to lower emission costs, which is conducive to expanding exports to the outside world.

Secondly, the burden on enterprises will become increasingly heavy.

In order to meet the relevant obligations required by CBAM, all production enterprises exporting to the EU market must bear additional administrative costs for emission reporting and verification, which may be passed on to consumers. Of course, in order to ensure the smooth implementation of the new mechanism, the EU also needs to strengthen the construction of the customs system, and enterprises will have to face new bureaucratic structures and cumbersome inspections, and the administrative burden will also increase.
According to a survey report by the World Federation of Large Enterprises, 83% of European respondents believe that imposing a carbon tax will lead to an increase in import prices, while 75% of respondents expect CBAM to affect their future import choices and require new arrangements. Therefore, the federation pointed out in its report that if measures are not taken in a timely manner to address the administrative burden and increased costs faced by European importers, as CBAM advances, it may cause trade chaos and drag down the European economy.
Thirdly, the first six major industries will be affected.
At present, the EU's CBAM collection scope has taken the lead in covering six industries: steel, cement, aluminum, fertilizers, electricity, and hydrogen. But in the later amendments, organic chemicals and plastics were added, so it is highly likely to be included in the future as the scope of collection is expanded in the next stage.
The EU carbon tariffs have a significant impact on manufacturing countries with a focus on industrial production and exports, and these major industries will inevitably be impacted. On the one hand, pushing up export costs will intensify market competition for basic bulk products, while also posing greater challenges to export trade; On the other hand, the production costs of enterprises will increase, and some high polluting and high-energy consuming enterprises will even face the risk of being eliminated.
According to statistics, the EU accounts for approximately 16% of global imports and holds an important position in international trade. The EU CBAM may lead to a repositioning and reshuffle of global trade, with countries and regions with the lowest emissions taking the opportunity to expand their export share and seize the EU market. Countries and regions with high carbon emissions may be forced to shift their support to affected industries for transformation, in order to reduce the risks brought by EU carbon tariffs.
In summary, criticism and debate over unilateral protectionism against EU carbon tariffs continue, and relevant countries have entered into multilateral negotiations through the World Trade Organization to reduce the burden on developing countries and reverse the significant decline in global trade caused by distorted and unequal trade conditions. (Source of this article: Economic Daily Author: Weng Donghui)