The Impact Of EU CBAM Imposing Carbon Tariffs On China’s Manufacturing Exports

The European Commission formally announced the EU’s legislative proposal on the establishment of a Carbon Border Adjustment Mechanism in July 2021 to start the legislative process.On April 25,2023(Luxembourg time),the Council of the European Union voted to approve the agreement on the European Carbon Boundary Adjustment Mechanism(CBAM)agreement,which will enter into force on October 1,2023.Carbon tariffs will be imposed in 2026 mainly on products related to the power,cement,fertilizer,steel and aluminum industries,as well as chemical products(including organic chemicals,hydrogen,ammonia)and polymer products(i.e.plastics and their products).EU is the second largest trading partner of our country,and our country is also the largest carbon emission country,EU carbon tariffs will inevitably have a huge impact on our manufacturing industry.At the same time,the United States and other developed countries also have the environmental conditions of Levy,so joint levy and expand the scope of Levy also into the possible scenario,which will help our manufacturing carbon emission reduction policy-making.Based on the Melitz and Ottaviano(2008)model,this paper constructs a linear demand model of firm heterogeneity under the impact of carbon tariffs by adding the supply-side cost function in the form of specific tariffs.This paper makes a theoretical analysis on the short-term and longterm export decision-making of enterprises by using mathematical model derivation method.The empirical part is based on the 2000-2014 multi-regional input-output table,which is reported by WIOD in 2016,and calculates the direct emission coefficient,the total emission coefficient and the implied export carbon emission of each sector of our manufacturing industry,then we calculate the carbon tariff rate and simulate the influence of carbon tariff on enterprise’s output and export of each sector of our manufacturing industry using GTAP model.Through the study,this paper finds that when levying on some industries,the domestic output and total exports of the industries levied by the exporting countries are negatively affected,while the importing countries are positively affected,and all increase with the improvement of the collection standards.industries that have not been levied carbon tariffs on the contrary.When the whole manufacturing industry is levied,the domestic output and total exports of most industries decrease,and the range of change increases with the improvement of the tax standard.The impact of carbon tariffs imposed by Europe and the United States on domestic output and total exports in most manufacturing sectors is greater than that imposed by the European Union alone.On account of above findings,this paper argues that in addition to advancing energy productivity in manufacturing and promoting carbon neutrality at the enterprise level,modifying the industrial and export trade structure at the industry level,and vigorously developing a green and low-carbon circular economy,it is also necessary to improve the construction of the carbon market,establish a carbon tax mechanism,connect China’s national carbon market with the EU carbon market,and fundamentally avoid imposing carbon tariffs.At the same time,it is very important to broaden home demand,strengthen the competitive power of the Chinese market.Therefore,the government can help export enterprises return to domestic market,making export and internal sales booming come true.