Impact of the EU Carbon Boundary Adjustment Mechanism on China and China’s Responses

EU countries are the main initiator of stricter economic measures of responsibility for greenhouse gas emissions. In order to achieve the goal of global carbon neutrality and minimize carbon leakage, the EU is implementing the Carbon Border Adjustment Mechanism (СВАМ EC). As the largest emitter of carbon and the EU’s largest trading partner, China actively responds to the CBAM EU. This article reviews the history of the EU’s СВАМ and assesses the implications of the system for China. Authors show that, on the one hand, in the short term, the EU’s implementation of a higher border carbon adjustment tax will weaken the competitiveness of Chinese companies in the European market, especially in high-carbon industries such as steel and aluminum. On the other hand, trade patterns between China and Europe could change, which would to some extent facilitate Chinese companies to participate in the global carbon market and encourage them to invest more in combating climate change and reducing carbon emissions. The authors also propose measures to prepare for the implementation of the СВАМ and to improve China’s carbon regulatory system.

China, EU, CBAM, carbon, competitiveness, cooperation