"Carbon tariff", another obstacle for new energy vehicles to enter Europe?
On October 1, the EU's Carbon Border Adjustment Mechanism (CBAM) entered the trial operation stage, and the world's first "carbon tariff" came into effect.
The mechanism is mainly aimed at six major industries: electric power, steel, aluminum, cement, chemical industry and hydrogen. However, according to the analysis of the Automotive Industry Research Institute of Chebai Think Tank, the automobile industry is very likely to become a new batch of "taxation" objects in the future.
This means that Chinese auto companies will face high "carbon tariff" costs with European importers, thus losing the price advantage of the original export to the EU.
This move will adversely affect Chinese companies' exports to the EU. At the 15th World Trade Organization (WTO) Trade Policy Review Conference with the EU in June, Chinese representatives said measures such as CBAM would discriminate against imports and restrict market access, especially from developing members.
Caijingqiche (ID: caijingqiche) found that when Chinese products are exported to Europe, the carbon emissions paid in the producing country can be used to offset carbon tariffs. However, the average carbon price in China's carbon market in 2022 is expected to be 59 yuan / ton, which is far from the price of 6 to 700 yuan after the EU conversion, and Chinese car companies may face large "green" bills if they want to export to the EU.
Once the auto industry is included in CBAM, SAIC, Chery, Geely, BYD and other car companies that are now performing well in the European market will be deeply affected.
01 Six major industries affected, automotive or next
On May 17, CBAM passed by the European Parliament with 450 votes in favor, 115 against and 55 abstentions, which means that the dust has settled on the world's first "carbon tariff".
From October 1, CBAM officially entered the trial operation stage, the transition period will be until the end of 2025, and it will be gradually and fully implemented from 2026 to 2034, and after 2035, free carbon allowances for EU-ETS (European Union Emissions Trading System) and high-carbon products covered by CBAM will be completely abolished.
The first batch of industries to be included in the high risk of carbon leakage and high carbon emissions are: power, steel, aluminum, cement, chemical industry, hydrogen and other six industries.
During the transition period, by the end of 2025, these six sectors will need to meet their reporting obligations and submit data on carbon emissions implied by imported products annually. At the end of the transition period in 2026, importers will have to pay for the emissions of imported products.
What does this mean in the case of the steel industry?
According to data from the General Administration of Customs, in 2022, China's total exports to the EU will be 374 million yuan, of which steel exports will be 3.72 million yuan, accounting for about 1%. Therefore, the Institute of Energy Conservation and Environmental Protection of CCID Research Institute pointed out that, on the whole, the industries included in CBAM do not account for a high share in the structure of export products to the EU, and the impact is relatively small.
But for the steel industry itself, the losses amount to $200 million to $400 million.
Fan Tiejun, president of the Metallurgical Industry Planning and Research Institute, said: "Based on the CBAM rules that have been introduced, considering the amount of steel products exported to the EU every year, the total amount of steel products exported to the EU, and the carbon price of the EU carbon market, the export cost of China's steel industry will increase by about 4%-6%, and it will be necessary to pay carbon taxes of 200 million to 400 million US dollars to the EU every year." ”
In the long run, this agreement is a sword of Damocles hanging over the new energy vehicle industry.
According to the analysis of the Institute of Energy Conservation and Environmental Protection of the CCID Research Institute, on the one hand, the European Commission will consider expanding the scope of application of CBAM horizontally to other industries in the future. On the other hand, for the existing six major industries, the European Commission will also vertically expand its upstream and downstream products.
"This means that in the long run, CBAM's industry coverage will gradually extend to products downstream in the supply chain." Taking the steel and aluminum industry as an example, if it extends to downstream products, machinery and transportation equipment will bear the brunt, and the indirect export of a large number of steel and aluminum products will be seriously affected. The Institute of Energy Conservation and Environmental Protection of the CCID Research Institute pointed out.
You know, in order to practice the concept of green environmental protection, low-carbon industries usually adopt more expensive environmentally friendly raw materials, high-tech technologies and pollutant treatment technologies. This means that low-carbon products will have a higher cost and less price advantage than high-carbon products.
Therefore, in the absence of government intervention, consumers are often more inclined to pay for lower-cost high-carbon products, and the market share of low-carbon products will gradually shrink in the market process of "bad money driving out good money".
Shao Shuai, distinguished professor of the Business School of East China University of Science and Technology, pointed out that the essence of the EU CBAM is trade competition based on climate change, and one of its deeper purposes is to protect the international competitiveness of EU enterprises.
According to the requirements of CBAM, the EU will adjust the price according to the carbon content of imported products, thereby reducing the imbalance between EU enterprises and developing country enterprises in carbon emission costs, which will weaken the comparative advantage of developing country enterprises in product prices, and then reduce the export volume and trade capacity of developing countries.
02 Hundreds of millions of dollars in green bills
Once included in the industrial scope of CBAM, Chinese car companies that want to export to the EU will face large "green" bills with importers.
The way carbon tariffs are calculated is of great concern. CBAM tax = number of CBAM vouchers× CBAM voucher price = (product carbon emissions - free emission credits received by similar products in the EU) × (EU ETS carbon price - carbon price of exporting countries)
Image source/network
In the formula, the EU ETS carbon price refers to the weekly average settlement price of the EU carbon allowance auction in the previous week. Carbon emissions are calculated to include both direct and indirect emissions, including greenhouse gases such as carbon dioxide (CO2), nitrous oxide (N2O) and perfluorinated compounds (PFCs). For emissions that cannot be calculated accurately, the default value (that is, a predetermined default value) is used for calculation.
It is worth noting that the calculation of the default value needs to include the average emission factor of the grid of the producer country, which is where other countries can propose changes to the EU, and it means that countries can reduce carbon tariffs by reducing the average emission factor and refining the calculation of the default value.
Carbon tariffs are not a small amount. The average carbon price of the EU carbon market in 2022 is 81 euros/ton (equivalent to about 629 yuan/ton), and with the continuous positive news of the CBAM agreement, the carbon price once exceeded the 100 euros/ton (equivalent to about 777 yuan/ton) mark this year.
Of course, CBAM stipulates that the carbon emissions price paid by imported products in the producing country can be used as a deduction. In other words, if a company has already paid a part of the carbon price at home, it can pay less when exporting to the EU.
But for now, there is still a "gap" between the carbon price in the carbon trading market between China and the EU, and most of the carbon price paid by companies may still have to go into the EU's pocket.
The 2022 China Carbon Price Survey released by ICF International Consulting estimates that the average carbon price in China's carbon market in 2022 is expected to be 59 yuan/tonne, and by 2025, the carbon price is expected to rise to 87 yuan/tonne per tonne, and will reach 130 yuan/ton by 2030.
Compared with the price of 6 or 700 yuan after the EU conversion, the carbon emission price borne by enterprises in China can only be regarded as a "drop in the bucket".
According to a report by the Institute of Nuclear Energy and New Energy Technology at Tsinghua University, China's export costs to Europe are expected to increase by about US$305 million a year under the US$52/mt carbon price differential, taking into account the impact of free allowances. If the free quota is taken into account, the cost of China's exports to Europe will increase by $100 million to $305 million a year. About three-quarters of the cost comes from steel products.
China also said at the previous World Trade Organization (WTO) 15th Trade Policy Review Conference on the EU that measures such as CBAM are regrettable. China cited a new research report by the Africa Climate Foundation that CBAM will cause $25 billion in losses to African countries every year.
In this sense, the EU CBAM is undoubtedly a more complex hidden carbon tariff, and its real intention is to protect trade in the name of climate change.
03 In addition to environmental protection, there is also industrial business
It is generally believed that the EU proposed a carbon border adjustment mechanism and imposed carbon tariffs for two main purposes, on the one hand, to restrict carbon dumping, and on the other hand, to prevent industrial outflow.
In order to achieve higher emission reduction targets, the EU issued the European Green Deal, which plans to reduce greenhouse gas emissions by 55% by 2030 (compared to 1990) and to achieve carbon neutrality by 2050.
Protecting domestic industries and preventing industrial outflow is also an important purpose of CBAM.
The European manufacturing industry is facing the challenge of hollowing out. In 1998, the EU's manufacturing value added was $1.42 trillion, accounting for 24.3% of the global manufacturing value-added, but by 2021, this figure shrank to $2.54 trillion, accounting for 15.5%.
In the context of the energy crisis leading to large-scale shutdowns, European companies are "fleeing" Europe en masse, going to China, North America and India.
For example, in July 2023, German chemical giant BASF decided to fully advance its Verbund site project in Zhanjiang, Guangdong Province, China, and in the same month, Swiss chemical company INEOS, one of the world's top five chemical companies, signed a series of joint venture agreements with Sinopec (600028.SH) worth about US$7 billion.
The US state of Oklahoma has attracted more than 60 German companies to invest in business expansion, including Lufthansa, Siemens, Aldi and Fresenius.
Not only the low-end manufacturing industries such as steel, textiles and furniture have shrunk significantly, but also core industries such as automobiles, electromechanical, avionics, etc., but also because of the fierce competition in China, the United States, and Japan, the technological advantages are constantly weakening. Data show that the EU's trade surplus in machinery and transport products in 2022 was 216 billion euros, down from 272.27 billion euros in 2013.
At present, the development of China's automobile industry in the EU market is on the rise. Cui Dongshu, Secretary-General of the Passenger Association, pointed out that from January to August 2023, China's automobile exports reached 3.22 million units, with a sustained strong growth rate of 65%. Among them, the European market showed strong growth for two consecutive years.
Source: Cui Dongshu
According to data from the Gasch Automotive Research Institute, if the boots land, SAIC, Chery, Geely, BYD and other car companies that are now performing well in the European market will be deeply affected.
Source: Gasch Automotive Research Institute
In this regard, Chebai Think Tank suggested that the carbon management of the automotive industry should be strengthened and the carbon management capacity of the Chinese automotive industry should be strengthened. For example, establish carbon accounting and carbon footprint certification standards, improve carbon data monitoring systems, etc., to ensure that China's automotive industry can smoothly adapt to and cope with carbon management requirements under the influence of CBAM in the future.
Miao Wei, member of the Standing Committee of the National Committee of the Chinese People's Political Consultative Conference and deputy director of the Economic Committee, also pointed out that China's automotive industry should urgently develop an accounting mechanism for carbon dioxide emissions in the study of carbon footprint, from the beginning of raw materials to the final scrapping, renewal and dismantling of the whole life cycle.
"Many of our cars are now exported to Europe, and if the carbon tariff negotiation is one standard, it is easy to negotiate, and if two sets of standards are made, the future negotiation of exports, this restriction will also be very troublesome." ”
This article is from the WeChat public account"Caijingqiche" (ID: caijingqiche), author: Deng Yujie Deng Xia, editor: Wang Jingyi, 36Kr published with permission.
