China says EU's planned carbon border tax violates trade principles

The European Commission this month outlined plans to impose a Carbon Border Adjustment Mechanism (CBAM) on polluting goods from 2026. PHOTO: REUTERS

BEIJING (REUTERS) - China said on Monday (July 26) the European Union's plan to impose the world's first carbon border tax will expand climate issues into trade in violation of international principles and hurt prospects for economic growth.

The European Commission this month outlined plans to impose a Carbon Border Adjustment Mechanism (CBAM), or CO2 tariff, on polluting goods from 2026, forcing some companies importing into the European Union to pay carbon costs at the border on carbon-intensive products such as steel.

"CBAM is essentially a unilateral measure to extend the climate change issue to the trade sector. It violates WTO principles ... and (will) seriously undermine mutual trust in the global community and the prospects for economic growth,"saidMr Liu Youbin, a spokesman of the Ministry of Ecology and Environment said at a media briefing.

He reiterated China's stance that each country's response to climate change should take into account its level of economic development, and said the CO2 tariff would severely harm the willingness and capability of countries to tackle the issue.

As the world's top manufacturer of industrial raw materials such as steel and cement, China could suffer the most from the border tariffs scheme, researchers at Tsinghua University's Centre for Industrial Development and Environmental Governance said in a paper published in May.

However, they said the impact would fade over time and there was no evidence the tariff would have a long-term adverse impact on China's development.

Guotai Junan Futures said in a note the border tax could encourage China to base carbon prices in its national emissions trading scheme on EU benchmark prices.

Since it was launched on July 16, China's long-awaited scheme has recorded trading volumes of 4.83 million tonnes, at an average price of 51.7 yuan (S$10.90) per tonne.

That compares with an average of more than 50 euros (S$80.16) in the EU's carbon market.

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