core point
Our last report introduced the definition of carbon tariffs, the purpose and significance of carbon tariffs, the scope of products regulated by carbon tariff-related policies, the stages of promotion and the operation mechanism, the scope of carbon tariff supervision at different stages in the future, and highlighted the high risk of carbon leakage and high carbon emissions. Effects of Emission Products. Therefore, countries represented by China that mainly export high-carbon emission products should pay full attention to the progress of carbon tariffs. Recently (8 June 2022), Parliament decided to submit the report to the Environment Committee for further legislative work.
The carbon border adjustment mechanism policy is becoming more and more radical. The European Parliament proposed a new carbon leakage tool with higher ambitions. In addition to the five products of cement, steel, electricity, fertilizer and aluminum, hydrogen, ammonia, plastics and chemicals were added to further expand the product collection scope of CBAM; the European Parliament also hopes CBAM is extended to tax indirect emissions (emissions from production electricity). And shortened the CBAM transition period: CBAM shortened the original 3-year transition period to 2 years, and terminated the free quota in ETS 5 years earlier.
EU carbon tariffs could have a range of effects. Carbon tariffs levied on upstream materials with high carbon emissions can be smoothly passed on to the next industrial chain. Importers bear the increased cost of carbon tariffs on products and pass them on by raising product sales prices. Many countries are studying the introduction of carbon tariffs. The increased cost of tariffs will drive a general increase in the price of high-carbon products, which we call “carbon inflation.” In order to avoid the impact of the green trade war on China’s high-carbon industries, with the official entry into force of my country’s RCEP trade agreement in 2022, China’s high-carbon emission products may be gradually transferred.
The European energy mix is rapidly decarbonizing, and commodities with lower carbon content will be more competitive. Europe’s preference for the “cleanest” low-carbon goods, while the “less clean” goods are likely to be directed to other markets. At the same time, the EU’s energy mix is rapidly decarbonizing, with EU factories avoiding indirect carbon costs by sourcing renewable energy externally. As export trading partners have restrictions and requirements on the carbon emission intensity of imported products, international supply chain companies will continue to increase their demand for green electricity, driving the consumption of renewable energy and green electricity premiums.
Benchmarking the European Green New Deal, which requires EU energy independence, requires vigorously promoting the rapid development of renewable energy. One of the main directions of low-carbon development of products is to diversify the energy structure, and one of the most important directions is to replace renewable energy. The higher the proportion of renewable energy in the energy structure, the low-carbon transformation of products and the promotion of climate policies.
The decarbonization of the industrial sector needs to accelerate the large-scale application of green hydrogen. Hydrogen energy is also an important part of the EU’s future new energy system. On May 18, 2022, the European Commission officially announced the “REpowerEU” energy transformation action plan. The “action” proposes that the EU’s renewable hydrogen production will reach 10 million tons by 2030. Imports of recycled hydrogen reached 10 million tons. With the gradual reduction of green hydrogen production costs, green hydrogen is expected to become a common “decarbonization solution” for some difficult-to-decarbonize industrial fields. By 2030, about 30% of the EU’s primary steel production is expected to be deeply decarbonized with green hydrogen. carbon.
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