The European Union's carbon tax under its Carbon Border Adjustment Mechanism (CBAM) that will enter into force from 2026 could significantly affect China's steel and aluminum exports, according to a report shared by the US-based investment bank Goldman Sachs.
For steel, the rate of carbon tax under the CBAM will be six percent in the first year for China, though it is estimated that it could rise to as much as 21 percent in early 2030, while the region will start imposing a three percent tax on aluminum imports before leaping to seven percent in early 2030. However, Goldman Sachs analysts highlight that the tax could triple should the EU choose to impose tax on indirect emissions of smelters.
In 2022, China exported $20.5 billion worth of carbon-intensive goods covered by the CBAM, including $14.6 billion of steel and about $5.5 billion of aluminum.
As SteelOrbis reported previously, Goldman Sachs expects that, since Indian steel producers operate at a carbon-intensity level well above the EU and global level, they will be affected more by the EU's carbon tax and thus exposed to elevated charges.
India has indicated that it will fight against the EU's CBAM at the next WTO meeting that will take place on February 26-29.
The carbon tax will be imposed on the steel, aluminum, cement, hydrogen, fertilizer and electricity sectors.
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