China steel association says EU carbon tax a new trade barrier, calls for more talks

BEIJING : The Carbon Border Adjustment Mechanism (CBAM) proposed by the European Union creates a new trade barrier for Chinese exports, China’s state-backed steel association said on Friday, calling for more talks with the bloc to address climate issues.

The EU approved in April the world’s first plan to impose a levy on high-carbon goods imports from 2026, targeting imports of steel, cement, aluminium, fertilisers, electricity, and hydrogen.

The levy would pose a big threat to steel producers in China, the world’s top exporter of steel, as long as their production remains more carbon-intensive than in the EU.

The new regime entered a trial stage in October, requiring importers of goods into the EU only to report carbon emissions embedded in those products.

A fee will be required from 2026 when it is fully in force.

The carbon border levy aims to put EU industries and foreign competitors on a level footing, to prevent EU producers relocating to regions with less stringent environmental rules.

However, it will also raise costs of steel products shipped to the EU, weakening China’s price competitiveness.

“The EU’s unilateral establishment of CBAM is in essence a new trade barrier created under the auspice of low carbon,” the China Iron and Steel Association (CISA) said.

CISA’s comments came in response to a query from Reuters sent in September, ahead of the start of the initial phase of the CBAM.

CBAM does not take into account varying stages of development in different countries and goes against the principle of “common but differentiated responsibilities”, the association said.

“Once other countries take reciprocal and similar trade protection measures to safeguard their interests, it will result in higher trading costs and mounting risks of trade friction,” CISA said.

“We hope the EU could carefully consider cost and operational challenges posed to its downstream steel consumers due to the change in import structure and engage in more communication with all relevant parties to address climate challenges together,” it added.

The scheme will likely increase China’s export costs of steel products by between 4 per cent and 6 per cent, Jiang Wei, the association’s vice chairman, told reporters at a quarterly briefing in late October.

Consultancy Wood Mackenzie said in September that CBAM is likely to significantly raise the costs of steel imports from India and China.

India is weighing local tax options to avoid the EU carbon levy after unveiling in May its plan to file a complaint to the World Trade Organization over the EU’s carbon tax on imports.