THE Carbon Border Adjustment Mechanism (CBAM) proposed by the European Union creates a new trade barrier for Chinese exports, China’s steel association said Friday, calling for more talks with the bloc to address climate issues.

The European Union approved in April the world’s first plan to impose a levy on high-carbon goods imports from 2026, targeting imports of steel, cement, aluminum, fertilizers, electricity and hydrogen.

The levy would pose a big threat to steel producers in China as long as their production remains more carbon-intensive than in the European Union.

The new regime entered a trial stage in October, requiring importers of goods into the European Union only to report carbon emissions embedded in those products.

A fee will be required from 2026 when it is fully in force.

The carbon border levy aims to put European Union industries and foreign competitors on a level footing, to prevent European Union producers relocating to regions with less stringent environmental rules.

However, it will also raise costs of steel products shipped to the European Union, weakening China’s price competitiveness.

“The European Union’s unilateral establishment of the CBAM is in essence a new trade barrier created under the auspice of low carbon,” the China Iron and Steel Association (CISA) said.

The CBAM does not take into account varying stages of development in different countries and goes against the principle of “common but differentiated responsibilities,” the CISA said.

“Once other countries take reciprocal and similar trade protection measures to safeguard their interests, it will result in higher trading costs and mounting risks of trade friction,” the CISA said.

“We hope the EU could carefully consider cost and operational challenges posed to its downstream steel consumers due to the change in import structure and engage in more communication with all relevant parties to address climate challenges together,” it added.

The scheme will likely increase China’s export costs of steel products by between 4% and 6%, Jiang Wei, the association’s vice chairman, told reporters at a quarterly briefing in late October.

Consultancy Wood Mackenzie said that the CBAM is likely to significantly raise the costs of steel imports from India and China. (SD-Agencies)