Influences of Border Carbon Adjustments on China's Foreign Trade

The EU, the United States and other economies, with the intention to implement unilateral trade measures Border Carbon Adjustments, impose emission reduction pressure on developing countries. Once implemented, the measures will have great impact on China's foreign trade. Using the input-output table in 2007, this paper had analyzed the influences on China's foreign trade as a whole and sub-sectors in three tax rates scenarios. The results showed that the tariff level of China's exports will increase by 3.6%-6.3% if the tax was levied on exports embodied emissions, and by 1.0%-1.7% if levied on export direct emissions. In 2007, the former total amount of carbon tax was about US$42.6-73.0 billion, 4 times that of the latter. Based on export embodied emissions, sectors largely influenced were non-traditional energy intensive ones, such as textile, et al. These sectors should be encour-aged to carry out industrial upgrading, raising the value-added of export goods, and reducing their embodied emissions by reduction of energy intensity. Taking into account of the complexity of data collection, the tax levied on products direct emission is more operational. The results showed that the five top sectors most affected were other chemical materials, processing of petroleum and nuclear fuel, coking, smelting and rolling of ferrous metal and textile. Most of them were energy intensive sectors. Therefore, adjusting export products structure, and controlling too fast development of energy intensive industries are also important strategies in China.

The carbon border adjustment mechanism is inefficient in addressing carbon leakage and results in unfair welfare losses

The European Commission has proposed a Carbon Border Adjustment Mechanism(CBAM)to reduce carbon leakage and create a level playing field for its domestic products and imported goods.Nevertheless,the effectiveness of the proposal remains unclear,especially when it triggers threats of retaliation from trading partners of the European Union.We apply a Computable General Equilibrium model-Global Trade Analysis Project-to assess the economic and environmental impacts of different CBAM schemes.Here we show that the effectiveness of the CBAM to address carbon leakage risks is rather limited,and the CBAM raises concerns over global welfare costs,Correct to Gross Domestic Product(GDP)losses,and violation of equality principles.Trade retaliation leads to multiplied welfare losses,which would mostly be borne by poor countries.Our results question the carbon leakage reduction effect of a unilateral trade policy and suggest that climate change mitigation still needs to be performed within the framework of international cooperation.

Which sectors should be covered by the EU Carbon Border Adjustment Mechanism?

The European Union(EU)is developing the Carbon Border Adjustment Mechanism(CBAM)to address carbon leakage in international trade.However,the EU has paid inadequate attention to input-output linkages,specifically those in the steel,aluminum,and fertiliser industries.This study aims to identify priority sectors eligible for initial regulation within the emissions-intensive trade-exposed(EITE)industries based on input-output linkages and compare its impacts with the current CBAM sector coverage.This study constructs a Global Production Network(GPN)and Carbon Flow Network(CFN)to present the input trade and embodied carbon flows for the EITE industries.This study highlights the role of the EITE industries as influential nodes in the production network and how the EITE industries in the EU contribute to carbon emissions.To improve the economy and political acceptability,CABM should cover four priority sectors with low economic impacts but a crucial role in reducing emissions,such as plastics,phosphorus fertiliser,aluminum,and copper industry.

China and the World under the Goals of Carbon Peaking and Carbon Neutrality:Green and Low-Carbon Transition,Green Finance,Carbon Market,and Carbon Border Adjustment Mechanism

China has always tried to maintain multilateralism and advocated working together to deal with global climate change through multilateral mechanisms.Although China's announcement to peak its carbon emissions by 2030 comes as no surprise,its commitment to carbon neutrality does.As the period between its carbon peaking and carbon neutrality is far shorter than that in the developed countries,China's economic and energy structures need to be adjusted toward the low-carbon and carbon-free end with unprecedented efforts.To that end,China should define the responsibilities of local authorities and industrial entities to promote the orderly accomplishment of carbon peaking in all regions and industries.To supply the huge investments needed to achieve the goals of carbon peaking and carbon neutrality,China has an urgent need to accelerate the development of green finance and a national carbon emissions trading market,guide the rational allocation of resources,and channel resources to eco-friendly projects for green and low-carbon development.At the same time,China and the international community should strengthen dialogue and coordination,promote international cooperation on the way to carbon neutrality,formulate widely acceptable policy guidelines as soon as possible,and avoid unilateral measures that may cause conflicts.

Key global climate governance problems and Chinese countermeasures

Presently,the full implementation of the negotiations and collaborations under the Paris Agreement faces new key problems and severe challenges.These problems and challenges include the following:how to honor the principle of“common but differentiated responsibilities”to facilitate a comprehensive,balanced,and effective implementation of the key elements of the Paris Agreement,such as adaptation,mitigation,finance,technology,capacity building,and transparency;how to uphold and maintain the status of China and other emerging countries as developing countries in light of the requirements of the United Nations Framework Convention on Climate Change and the historical responsibilities of these countries;and how to assess the goal of limiting the global temperature increase to 1.5℃and what constitutes an equitable carbon mitigation pathway for different types of countries.Developed countries and developing countries have drastically diverging views on carbon border adjustment measures for trade with developing countries proposed by several developed countries such as the European Union.Developed countries have demonstrated obvious intentions and actions designed to weaken and neglect the principle of“common but differentiated responsibilities”,to impose mitigation pressure on developing countries,to shift the responsibilities for emissions onto others,and to pass on the costs of mitigation.The maneuvering among different types of countries and interest groups has become increasingly intense.In response,China must maintain its strategic focus,adhere to the goals and principles established by the Paris Agreement,stick to its strategic positioning as a developing country,solidify strategic support from the developing world,and safeguard the legitimate rights and interests of developing countries.China played a conducive role in facilitating the Paris Agreement and has become an active participant,contributor,and leader in global climate governance.China must continue to follow Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and its conception of ecological civilization and the concept of building a community of common destiny,to actively lead the cooperation process in the construction of a global climate governance system characterized by equity,justice,and win-win collaborations,and to promote compliance with the Paris Agreement.At the same time,China should accelerate the green,low-carbon,circular transformation of its economy;accelerate the coordinated governance of the economy,environment,and climate change;and formulate and implement a long-term low-carbon development strategy.By the middle of the 21st century,while achieving the goal of building a great modern socialist country,China can also achieve a deep decarbonization development path that is in line with the goal of limiting the global temperature increase to well below 2°C and pursuing efforts to limit the increase to 1.5℃.