On March 15, 2022, the European Council reached an agreement on the relevant rules of the carbon boundary adjustment mechanism (CBAM). Under this mechanism, the EU will levy taxes on cement, aluminum, chemical fertilizer, steel and other products imported from countries and regions with relatively loose carbon emission restrictions. The carbon border adjustment mechanism is the core content of the package of environmental protection proposals put forward by the European Commission in July last year, that is, the carbon tariff, also known as carbon border adjustment tax (BTAS), which is a special carbon dioxide emission tariff on export commodities of countries that do not impose carbon tax or energy tax at home and have substantial energy subsidies. It is mainly developed countries that impose carbon dioxide emission intensive products imported from developing countries, such as aluminum An import tariff on steel, cement and some chemical products. The UK will levy a plastic packaging tax from April 1, 2022. In fact, since there is no unified carbon emission standard in the world, the imposition of carbon tariffs is bound to trigger a trade war.
China's carbon emission trading pilot has been launched since 2011. On February 1, 2021, the Ministry of ecology and environment issued the management measures for Carbon Emission Trading (Trial), which was officially implemented, aiming to give full play to the role of market mechanism in coping with climate change and promoting green and low-carbon development, promote greenhouse gas emission reduction, and standardize national carbon emission trading and related activities. In June 2021, the national carbon market began its first performance cycle. Although only the power generation industry was covered in the initial stage, this industry accounted for 40% of the national annual carbon emissions, which will be further expanded to other high emission industries in the future. At the same time, the carbon markets of the previous eight regional pilot projects continue to operate, generally covering high energy consumption industries such as steel, cement, aluminum, energy and transportation. In 2020, the average price of China's carbon price quota remained between us $3.28 and US $12.62, which was significantly lower than the price of the carbon emission trading system (EU ETS) (the average price was US $28.8). Since 2021, due to the tightening of the benchmark value of free quota, the EU carbon price has increased significantly, and the average price of quota at the end of June has exceeded US $60. For China, the current carbon price level is far lower than that of the EU. Even if China's exports to Europe have paid the carbon price at home, EU importers still need to buy CBAM certificates due to the asymmetry of carbon price. The price of the EU CBAM certificate is equal to the average price of EU ETS, which does not rule out the ambition of the EU to try to dominate the global carbon price and contain the carbon price of other countries with the price on its carbon emission trading market. Therefore, the implementation of CBAM will have a certain impact on the price fluctuation in China's carbon emission trading right market.
As the world's largest exporter of goods and the largest trading partner of the EU, the implementation of carbon tariffs by the EU will have a great impact on China's export-oriented industries. In international trade, China is a net exporter of "carbon emissions". Most of the manufacturing products exported are at the middle and low end of the international industrial chain, with high energy consumption and low added value. Although the European Council plans to set a minimum threshold to exempt products worth less than 150 euros from the obligations of the carbon boundary adjustment mechanism, the specific implementation time of this plan has not been determined. In 2020, China's exports of goods to the EU reached US $828.1 billion, accounting for 15% of China's total exports of goods and 22.4% of the total imports of goods from the EU. However, the implied carbon emissions between China and the EU are asymmetric. According to statistics, in 2018, China's exports implied carbon dioxide emissions of 1.53 billion tons and imports implied carbon dioxide emissions of 542 million tons, which are mainly affected by the energy consumption structure, product trade structure and related technologies.
According to the World Bank Research Report, if the "carbon tariff" is fully implemented, made in China may face an average tariff of 26% in the international market, and the export volume may decline by 21%. Although the implementation of CBAM will begin in the fields of cement, steel, chemical fertilizer, aluminum and electric power, more industries will be included in this system by 2023. The EU stipulates that importers of Member States must declare the carbon emissions of their imported goods. By 2026, CBAM will be in full operation. Importers from EU countries must declare the specific quantity of goods imported and carbon emissions of the previous year every year. The EU will comprehensively adjust the purchase and issuance of CBAM certificates based on the declared quantity. For plastic products export enterprises, this will inevitably increase their production costs and weaken their product competitiveness, and even some enterprises with high pollution and high energy consumption will be eliminated. According to statistics, the export amount of plastic products in 2021 was US $98.990 billion, a year-on-year increase of 29.1%. The EU is China's second largest export market. How to deal with the "carbon tariff" and minimize its adverse impact under the background of carbon peak and carbon neutralization will become the key to the long-term development of plastic products export enterprises.
