Lan Qingxin and Tian Geng: EU carbon tariffs should not become a 'green trade barrier'

After more than two years of transition, the EU plans to officially impose carbon tariffs (known as the Carbon Border Adjustment Mechanism, CBAM) on January 1, 2026. According to the Financial Times, the EU has postponed the review report originally scheduled to be released on December 10th, which includes including products such as car doors, gardening tools, washing machines, and kitchen stoves in the scope of the EU's first carbon border tax, as well as supporting anti circumvention measures and subsidies for exporters. The scope of this levy will be further expanded on the original basis, extending from upstream raw materials to downstream products. Once the relevant measures are evaluated and ultimately implemented, they may have a certain degree of negative impact on global trade.

The background of the birth of CBAM is the green development goal set by the European Union to address global climate change, which requires reducing the EU's greenhouse gas emissions to 55% of the 1990 EU greenhouse gas emissions level by 2030. Initially, the EU focused on the construction of a "domestic carbon emissions trading system" and set carbon emission quotas for high emission industries in the region. With the continuous promotion of carbon reduction and emission reduction work, the EU plans to impose corresponding tariffs on imported goods from industries such as steel, cement, aluminum, electricity, and fertilizers in countries (regions) that have not adopted the same carbon emission tax as the EU, and direct the tax revenue to invest in green economy industries. Now, the EU has announced a further expansion of the scope of carbon tariffs aimed at addressing the issue of "carbon leakage".

The so-called "carbon leakage" problem refers to the strict standard constraints set by the European Union on "carbon intensive" production processes in the region based on climate policies, but the climate policies of other countries, especially developing countries, are relatively loose compared to the EU, which makes it easy for EU companies to transfer production activities with high carbon emissions to countries with lower green production requirements or directly import related products from these countries, thereby forcing local EU companies to participate in international competition under "structural disadvantage". In this context, the EU intends to expand the scope of carbon tariff products and confirm that corresponding carbon prices have been paid for the carbon emissions generated during the production process of certain goods imported into the EU, helping to achieve climate goals while reducing the price advantage of imported goods, thereby consolidating and enhancing the international competitiveness of EU enterprises.

The EU carbon tariff mechanism will have a significant impact on the development of EU industries and the global trade landscape. In recent years, energy shortage has become a major challenge for the economic development of the European Union, and the international competitiveness of related manufacturing industries such as electricity and chemicals in the EU has shown a clear downward trend. If further carbon tariffs are imposed, it will lead to a significant increase in import costs for relevant enterprises within the EU, which is highly likely to accelerate the outflow of high carbon industries from the EU. At the same time, the EU's expansion of the scope of carbon tariff products globally may also increase the uncertainty faced by the global industrial and supply chains. Companies from various countries have to consider the "carbon cost" as a key factor in their production and operation when exporting to Europe, and some low-cost advantage companies may lose their competitiveness as a result.

In addition, the EU's move may also exacerbate the risks and challenges posed by trade protectionism.   Currently, the global economy is already facing serious risks of protectionism. If the EU further expands the scope of products covered by this mechanism, the international industrial division of labor system may face more negative impacts. Most developing countries with high carbon emissions and relatively backward green technologies will bear greater pressure from this new type of "green trade barrier", and may even trigger a rebound, causing a setback in global green economic development.

At present, developed countries have completed their primitive accumulation through carbon intensive industries, and their current green transformation is built on the "post industrial" economic structure. Under this premise, they transfer the burden of environmental governance to other countries by setting high standards for green development requirements and carbon pricing rules. However, developing countries are still in a structural upward period of capital deepening, with high elasticity of energy demand, rigid proportion of manufacturing industry, coexistence of financial repression and climate vulnerability. It is difficult to meet the green production standards of developed countries in the short term, and they do not have the ability or should not bear the pressure of "green trade barriers" from developed countries. Developed regions such as the European Union should leverage their technological and financial advantages to provide financial, technological, and capacity building support to developing countries, respect their development rights, and not restrict them through "green trade barriers"; Developing countries need to gradually optimize their industrial and energy structures based on their own national conditions, and actively participate in the formulation of global climate governance rules. Developed and developing countries should strengthen international cooperation and share responsibilities under the principle of "common but differentiated responsibilities", resolve differences in green development through dialogue and consultation, avoid the formation of "green trade barriers", and jointly move towards sustainable development. (The authors are professors at the Institute of Regional and Country Studies, University of International Business and Economics, and doctoral students at the School of International Business and Economics, University of International Business and Economics)