Page 6 - AsiaElec Week 35 2021

AsiaElec EMISSIONS AsiaElec

CBAM to have less

bite than bark

CHINA THE cost of the EU’s proposed CBAM may turn EU imports from China will be very small,” the
out to be less than initially feared by exporters authors including Adrien Assous said. “The cost
into the EU, a new report from Sandbag and will mainly be borne by EU consumers, while
E3G, two pro-green think-tanks, has found. importers recover most of it thanks to price
Three of the biggest exporters into the EU, the increases in EU markets.”
US, Russia and China, face the prospect of the The report explained that importers will
new carbon tax being slapped on their exports of recover part of the CBAM costs in the form of
carbon-intensive goods into the EU, principally higher selling prices for their products as free
iron and steel, chemicals, cement, aluminium allowances are phased out over the 10 years from
and electricity. 2026 to 2035.
However, the scheme as proposed covers only In the iron and steel sector alone, for example,
3.2% of EU imports, and 47% of free emission China’s would face just a 2% increase by 2035 in
allowances currently given to industry. the net costs of its $5.9bn iron and steel exports
This means that the CBAM, if implemented to the EU, the report calculated.
in its current proposed form, will raise the cost The CBAM aims to use EU ETS pricing
for EU importers of some goods from non-EU benchmarks to put a carbon price on imports of
countries to access the European market. carbon-intensive goods into the EU in order to
But the overall impact is likely to be small, as avoid EU manufacturers suffering from unfair
the current proposal only covers a small share competition. This would also see CO2 produc-
of exports to the EU, and importers will recover tion in the EU being displaced to the likes of Rus-
most of the additional costs through higher sia, China and the US in a process called carbon
prices in EU markets. leakage.
Russia would face the highest additional net The EU released the proposals in July, and
costs of €602mn by 2035, coming mainly from they still need to be approved by the member
iron and steel imports. states and the European Parliament.
For China, the new costs would stand at This scheme is part of the Fit for 55 package,
€208mn by 2035, the report found. a group of 12 directives and regulations aiming
The least affected would be the US, which to achieve 55% emissions reductions compared
would experience €10mn in new net costs to 1990 levels.
in 2026, the first year of the scheme, rising to From the market point of view, the CBAM
€25mn in 2035. will mean that 53% of the free allowances will
Furthermore, the higher costs will be likely remain unchanged, potentially undermining the
passed on to consumers, while importers of EU’s intention of using the CBAM to reduce car-
benefit from possible price increases, the report bon leakage and to create a level playing for the
estimated. carbon emitters.™
“The impact of the likely CBAM scenario on

P6 www. NEWSBASE .com Week 35 01•September•2021