The potential impacts of Carbon Border Adjustment Mechanism (CBAM) on China's high-carbon industries

Shiyu Wang, Changshuo Gong, Keren He, Ruiming Xiao, Xiaobin Dong, Ting Pan and Xue-Chao Wang

Energy, 2025, vol. 333, issue C

Abstract: The implementation of the EU Carbon Border Adjustment Mechanism (CBAM) is expected to have complex impacts on the upstream industrial chain, including energy consumption and carbon emissions. China, being the largest trading partner of EU, has been proactively dealing with the potential impacts, however, few studies have been conducted on this topic, especially in the high-carbon industries. By employing the STIRPAT model and Ridge regression as the primary analytical tools, this study endeavors to explore the driving factors behind the potential impacts of CBAM on these industries. The STIRPAT model and Ridge regression were mainly used. Results show that: (1) the embodied carbon emissions in their exports from industries of iron and steel, and fertilizer of China would slowly increase until 2030; (2) energy structure, energy intensity and the share of exports to EU are significantly influence the embodied carbon emissions; (3) CBAM would have the greatest economic impacts on industries of iron and steel, and aluminium; (4) The carbon tariffs of all four industries would decline under the low-carbon scenario, with the aluminium industry decreasing the most. It is expected that if the CBAM covers both the upstream and downstream industries products, more carbon emissions would be included in the scope of CBAM levies, resulting in potential higher carbon tariffs to China's high-carbon industries.

Keywords: Carbon Border Adjustment Mechanism (CBAM); Carbon tariffs; Energy structure; Carbon trading; Carbon neutrality; High-carbon industries (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:333:y:2025:i:c:s0360544225029573

DOI: 10.1016/j.energy.2025.137315

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