China Labels EU Carbon Tax as 'Discriminatory,' Threatens Countermeasures

Dubai | EcoPulse24

The Chinese Ministry of Commerce issued an official statement on Wednesday, describing the European Union's Carbon Border Adjustment Mechanism (CBAM) as 'unfair' and 'discriminatory,' and vowed to take countermeasures to protect its economic interests, according to Bloomberg. The statement comes as the CBAM enters full implementation.

China's Core Objections

The ministry criticized the high default carbon intensity values set by the EU for Chinese products, stating these standards 'do not align with China's current conditions or its future development path.' The statement noted that Brussels plans to raise these values over the next three years.

The ministry emphasized it would 'firmly adopt all necessary measures in response to any unfair trade restrictions' to safeguard China's development interests and the stability of global supply chains.

Accusations of Double Standards

The Chinese ministry sharply accused the EU of 'double standards,' referencing its recent decision to backtrack on the effective ban of new internal combustion engines, while simultaneously imposing external trade barriers under the guise of environmental protection.

The statement labeled CBAM as 'a new form of trade protectionism under the pretext of preventing carbon leakage,' warning it would increase the cost of climate action for developing countries and seriously undermine international trust.

CBAM's Historical Path

The European Commission first proposed CBAM in July 2021 as part of the 'Fit for 55' package, aiming to reduce carbon emissions by 55% by 2030 compared to 1990 levels. In December 2022, the European Parliament and Council reached a final agreement, followed by a transition period from October 2023 to the end of December 2025, during which the mechanism only required reporting without actual levies.

Initially, CBAM targets five key sectors: cement, iron and steel, aluminum, fertilizers, and electricity, with plans to gradually expand to finished and manufactured products. The EU's goal is to protect its high-carbon industries from unfair competition during the green transition, especially from producers operating in countries with looser climate regulations.

Impact on Chinese Industry

Chinese industries, especially steel and aluminum sectors reliant on coal, face significant challenges from CBAM. Estimates suggest Chinese factories could incur additional annual costs of hundreds of millions of euros. Exporters may need to either invest in lower-carbon technologies, requiring substantial capital, or accept the border fees, reducing their competitiveness in Europe.

This tax could also prompt some Chinese factories to redirect exports toward other markets in Asia, Africa, and Latin America, potentially reshaping global trade in carbon-intensive products.

Implications for the European Market

On the European side, CBAM could lead to higher prices for some imported goods, particularly in construction and manufacturing sectors reliant on competitively priced Chinese steel and aluminum. These costs may be passed on to European consumers.

European industries could benefit from reduced foreign competition, gaining greater market share. However, these gains may be offset by potential Chinese retaliatory measures targeting European exports, especially luxury cars, industrial machinery, and agricultural products.

The EU also faces challenges in managing relations with other trading partners. The United States has criticized CBAM and called for 'flexibilities' for its firms, while many developing countries view the mechanism as disguised protectionism. The World Trade Organization is closely monitoring CBAM's compliance with international trade rules, and analysts expect an increase in legal challenges in the coming months.