The Impact of the EU Carbon Border Adjustment Mechanism on Chinas Exports and Suggestions on Countermeasures

The European Parliament plans to gradually introduce the Carbon Border Adjustment Mechanism in 2023, with a complete implementation set for 2026. As an essential trading partner of the EU, China will shoulder an additional carbon border tariff due to the lack of low-carbon technology and the dependence on extensive development patterns. These extra costs will undermine the profit margins of Chinas carbon-intensive industry sectors, possibly resulting in decreased exports and a restructuring of production. The latest estimate of the exact costs of Chinas embedded carbon exports to the EU is a problem that has received limited academic attention. Using the IPCC carbon emission accounting methodology and non-competitive single-region input-output analysis, this research precisely measures the embedded carbon in Chinas exports to the EU for the nine most affected industries. Furthermore, this study quantifies the impact of the CBAM on Chinas exports of these nine industry sectors. The findings suggest that China should improve the domestic carbon emission trading system and take the initiative to participate in formulating a carbon pricing consultation and dialogue mechanism, mitigating the negative impact of the EU CBAM on exports.