On May 15, the EU's Carbon Border Regulation Mechanism, known as the "Carbon Tariff" (CBAM) Act, came into force。In June 2022, several U.S. senators also introduced a draft Clean Competition Act (CCA) and entered the Senate consideration process。A series of actions by developed economies such as Europe and the United States indicate that "carbon tariffs" may become an important factor affecting international trade in the future。In this context, how should Chinese export enterprises view and respond？
"For Chinese export enterprises, this is both an opportunity and a challenge。The latest research report published by King & Wood Law firm partner Su Meng and senior lawyer Shisodi believes that the opportunity is that China relies on years of green technology development, has accumulated a lot of technology in the field of new energy, and is also in a leading position in the world。The challenge is that "carbon tariffs" in developed economies may have higher requirements for monitoring, data quality, and third-party evaluation in product production, which not only puts new requirements on Chinese export enterprises, but also on third-party evaluation agencies and regulators。
Use the transition period to find ways to cope
On April 18, the European Parliament passed the Carbon Border Adjustment Mechanism (CBAM) bill.。On April 25, the European Council officially approved the CBAM Act。At this point, the bill completes the decision-making process of the entire EU legislation and enters into force 20 days after being published in the Official Journal of the European Union。
Along with the CBAM, a bill to reform the EU Carbon Trading System (EU ETS) has been passed。The bill proposes phasing out free carbon credits while imposing a levy on the carbon emissions implied in imported goods。In addition to the EU's CBAM, the United States is also working on legislation related to "carbon tariffs," but the Clean Competition Act has not yet passed Parliament。
"If China's export enterprises do not take effective measures to deal with, the most intuitive adverse impact is to increase the cost of their export products and reduce the price advantage of export products.。However, both the EU "carbon tariff" and the infant CCA bill have left a window for Chinese exporters to better understand and familiarize themselves with the various systems under the bills and find ways to cope with future changes in the international carbon market and international trade。
According to KWM lawyers, the CBAM act will enter a transition period in October this year, and imported goods need to declare their implied carbon emissions according to the CBAM Act, but there is no actual fee.Phasing out the EU's free carbon allowances and imposing a "carbon tariff" on imported goods from 2026。In fact, there are still some general or programmatic provisions in the CBAM Bill at this stage, and relevant provisions may be refined or adjusted according to the implementation of the transitional period。"In the process of CBAM adjustment and improvement, in addition to understanding the specific system of CBAM, Chinese export enterprises also need to understand the basic logic core of CBAM system, in order to find a way to adapt to all changes.。”
Exports to the EU must purchase a "carbon tariff" certificate
In addition to helping the EU meet its 2030 climate goals, CBAM is more directly focused on tackling carbon leakage。Carbon leakage refers to the increase in total emissions caused by the adoption of stricter climate policies in one country or region, resulting in the relocation of production to other countries or regions with less stringent restrictions on greenhouse gas emissions。
"The core logic of CBAM is to reduce the cost of carbon emissions by EU enterprises by transferring production to other countries and regions in the world, and then re-attach it to the cost of enterprises in the way of charging 'carbon tariffs' to equalize the carbon costs of the EU and other countries and regions.。KWM lawyers said that whether from the mandatory requirements of emission reduction or the development of the carbon market, the EU is the world's leader in the low-carbon field, which also means that the "carbon cost" of EU enterprises to produce products is higher。In the era of globalization and collaboration, the law of the market has led enterprises to constantly look for carbon cost "depression".。Many EU companies seek to transfer their production to other countries and regions with lower carbon costs and export their products back to the EU, thereby reducing their carbon costs and enhancing their market competitiveness。
For this reason, every ton of carbon emissions in the production process of products imported into the EU needs to buy a CBAM certificate when entering the EU border, that is, 1 CBAM certificate = 1 ton of implied carbon emissions。The CBAM voucher price is calculated by the European Commission based on the average closing price of carbon allowances in the EU ETS on the auction platform。The total price of CBAM paid by the enterprise is equal to the number of CBAM certificates (implied carbon emissions) x the price of CBAM certificates。
"The total price of CBAM calculated by the formula is not the final amount payable by the enterprise。King Du lawyer prompted export enterprises, because there are some possible deductions for enterprises。From the perspective of preventing carbon leakage, the object of taxation of CBAM is the carbon cost saved by enterprises transferring production to countries and regions outside the EU。Therefore, CBAM also needs to be further adjusted for the carbon costs that different companies already pay during the production of their products。The total CBAM price paid by companies is also adjusted based on two factors: the free carbon allowances available to similar industries in the EU and the carbon price already paid in the country of origin for products imported into the EU。
"If Chinese exporters can prove in some EU-accepted way that they have paid carbon costs in China, they may reduce the total amount of CBAM they may pay based on this fact.。"Kindu lawyer stressed， CBAM's default premise in calculating the taxable price is，The imported product produces more carbon emissions in its exporting country than the carbon allowances that the EU grants to similar companies for free，And the carbon costs it has to pay in the exporting country are lower than the carbon costs that similar industries have to pay to produce in the EU，And tax the difference。
(Source: International Business Daily)