China steel association says EU carbon tax a new trade barrier, calls for more talks -November 03, 2023 at 07:24 am EDT

BEIJING, Nov 3 (Reuters) – The Carbon Border Adjustment
Mechanism (CBAM) proposed by the European Union creates a new
trade barrier for Chinese exports, China’s state-backed steel
association said on Friday, calling for more talks with the bloc
to address climate issues.

The EU approved in April the world’s first plan to impose a
levy on high-carbon goods imports from 2026, targeting imports
of steel, cement, aluminium, fertilisers, electricity, and
hydrogen.

The levy would pose a big threat to steel producers in
China, the world’s top exporter of steel, as long as their
production remains more carbon-intensive than in the EU.

The new regime entered a trial stage in October, requiring
importers of goods into the EU only to report carbon emissions
embedded in those products.

A fee will be required from 2026 when it is fully in force.

The carbon border levy aims to put EU industries and foreign
competitors on a level footing, to prevent EU producers
relocating to regions with less stringent environmental rules.

However, it will also raise costs of steel products shipped
to the EU, weakening China’s price competitiveness.

“The EU’s unilateral establishment of CBAM is in essence a
new trade barrier created under the auspice of low carbon,” the
China Iron and Steel Association (CISA) said.

CISA’s comments came in response to a query from Reuters
sent in September, ahead of the start of the initial phase of
the CBAM.

CBAM does not take into account varying stages of
development in different countries and goes against the
principle of “common but differentiated responsibilities”, the
association said.

“Once other countries take reciprocal and similar trade
protection measures to safeguard their interests, it will result
in higher trading costs and mounting risks of trade friction,”
CISA said.

“We hope the EU could carefully consider cost and
operational challenges posed to its downstream steel consumers
due to the change in import structure and engage in more
communication with all relevant parties to address climate
challenges together,” it added.

The scheme will likely increase China’s export costs of
steel products by between 4% and 6%, Jiang Wei, the
association’s vice chairman, told reporters at a quarterly
briefing in late October.

Consultancy Wood Mackenzie said in September that CBAM is
likely to significantly raise the costs of steel imports from
India and China.

India is weighing local tax options to avoid the EU carbon
levy after unveiling in May its plan to file a complaint to the
World Trade Organization over the EU’s carbon tax on imports.
(Reporting by Amy Lv and Dominique Patton in Beijing; Editing
by Florence Tan and Sonali Paul)