Beijing has vowed to take “all necessary measures” after the European Union’s carbon border tax fully took effect, a move that analysts said could significantly raise costs for Chinese exports such as steel and threaten their competitiveness in Europe.
The Carbon Border Adjustment Mechanism (CBAM), which fully entered into force on Thursday following a two-year transitional phase, requires importers of steel, aluminum, cement, fertilizers, electricity and hydrogen to purchase certificates to cover the carbon emissions embedded in their products. The mechanism is designed to force importers to pay the difference between the carbon price in the country of production and that in the EU, aiming to prevent “carbon leakage,” such as when companies based in the EU could move carbon-intensive production abroad to take advantage of lax standards.
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