Chinese Business Community Criticizes EU CBAM as a New Tariff Barrier

In China's economic circles, there are ongoing criticisms that the European Union's (EU) Carbon Border Adjustment Mechanism (CBAM) will become a new tariff barrier negatively impacting globalization.

According to the South China Morning Post (SCMP) on the 11th, Zhou Chengjun, director of the Research Institute of the People's Bank of China, recently stated at an academic forum, "If Europe imposes taxes based on carbon price differences on Chinese products, it could have a very significant impact on industries and companies."

CBAM is a system that imposes a carbon price linked to the EU Emissions Trading System on the carbon emissions of products such as steel, aluminum, cement, and fertilizers imported into the EU. After a transition period of about two years, starting January 1, 2026, exporters must purchase emission allowances (CBAM certificates) corresponding to the amount of carbon emissions exceeding EU standards during the manufacturing process. Ahead of the full implementation in 2026, mandatory emissions reporting will begin this October during the transition period.

Director Zhou explained, "This violates basic economic principles," adding, "The fundamental premise of cross-border trade and taxation is that the products and services must be tradable." He argued, "There should be no tax issues on things that cannot be traded."

According to China Customs, from January to May this year, the EU was China's second-largest export destination after the Association of Southeast Asian Nations (ASEAN). In particular, China is the largest supplier to the EU in sectors such as cement, aluminum, and steel. Pan Taijun, director of the China Metallurgical Industry Planning and Research Institute (MPI), has projected that CBAM could increase export costs for China's steel industry by 4-6%, with the carbon tax amounting to between 200 million and 400 million US dollars.

Director Pan stated, "As the industrial scope of CBAM gradually expands and the carbon price gap between China and Europe widens, Chinese steel products will have to bear higher costs and taxes when exported to Europe," adding, "Other advanced countries may also establish trade barriers similar to CBAM."