The European Parliament voted on March 10 to support the establishment of a CBAM (Carbon Border Adjustment Mechanism) resolution. The European Union is expected to introduce a bill in June and plans to start implementing a carbon tariff policy in 2023. However, judging from the information disclosed at the European Steel Manufacturers Association's web video seminar focusing on EU climate policy on March 17, European steel manufacturers and the European Commission have discussed how to introduce carbon border adjustment mechanisms in Europe, and Whether the establishment of the carbon boundary adjustment mechanism can have a positive impact on the green development of the European steel industry is divided.

"The establishment of a carbon boundary adjustment mechanism on the EU's existing ETS (Emissions Trading System) is undoubtedly a kind of'overcompensation'. This will violate the principle of fair trade in the European green steel market and violate the relevant policies and regulations of the World Trade Organization. "Mette Koefoed Quinn, head of the carbon emissions trading system of the Climate Action Department of the European Commission's Environment Agency, told the EU steel industry representatives in a web video seminar.

Alex Eggert, chairman of the European Steel Manufacturers Association, said: "We have had full discussions with international trade lawyers, and the other party has made it clear that the carbon border adjustment mechanism is fully compatible with the relevant WTO policies. Integrating the carbon boundary adjustment mechanism with the carbon emissions trading system to fill the gap between free border allocation and carbon emission reduction costs is also fully in line with regulations."

In addition, the members of the association also require that manufacturers be provided with a transition period of at least 8 years after the establishment of the carbon boundary adjustment mechanism, during which they must continue to maintain their original free allocation. A small number of members of the association even stated that the transition period should last until the European green steel market is fully formed in 2030.

In 2013, the third-stage reform of the EU’s carbon emission trading system concentrated the power to set the total amount of emission allowances in the hands of the European Commission, which determines the total amount of carbon emission allowances for the EU as a whole, and allocates them to member states, requiring each Member states comply with it. At the same time, the internal distribution methods of each member state are also stipulated, requiring countries to increase the proportion of quotas allocated by auction; for free quotas, it is also required to calculate and allocate in a way that conforms to the "baseline method."

Egert said: "At present, the European steel industry has lost its competitive advantage in the world steel market. According to the current market price estimation, the current carbon emission trading system still has a shortage of about 20% of the free share of the steel industry. The steel industry lost approximately 3 billion euros in 2018."

According to data released by the European Union of Iron and Steel Industry (Eurofer), the EU imports about 30 million tons of steel and exports about 20 million tons of steel each year. The annual difference of about 10 million tons of steel imports and exports makes it extremely vulnerable to the negative effects of price competition in the world steel market. The impact is extremely cost-sensitive.

According to the "European Green Agreement", the European steel industry needs to reduce its carbon emissions by 55% by 2030 compared to 1990, and achieve "carbon zero" by 2050. According to Adolfo Aiello, head of the Climate and Energy Department of the European Iron and Steel Industry Alliance, the achievement of this goal may require at least 144 billion euros of investment, including the development and application of breakthrough technologies, and these breakthrough technologies The successful R&D and wide application of the steel may make the current EU steel production costs 35% higher, or even 100%; the power supply to meet green production will also be as high as 40 billion kilowatt-hours, which will be 7 times the current supply. “We fully support the climate plan, but we also hope that the plan’s goals can be achieved in the most cost-effective manner. The higher the climate neutral goal, the more good carbon leakage is needed (that is, if a developed country adopts carbon emission reduction measures, it may lead to the country’s The production of domestic high-energy-consuming products is transferred to other countries that have not adopted carbon emission reduction measures) protection policies and technical support." Ai Luo said.

The EU's carbon price has been hovering around 7 euros/ton for the past three years, and the recent carbon price has risen sharply, reaching 40 euros/ton. It is expected that its carbon price may even rise to three-digit levels within 10 years.

However, the European Commission is still resolute, saying that it is currently actively studying six highly feasible industrial decarbonization reform measures, and still does not believe that the carbon boundary adjustment mechanism has a positive effect as a supplement to the carbon emissions trading system. “The current carbon emissions trading system can ensure that steel companies are provided with adequate carbon leakage protection until at least 2030. However, companies are now turning their attention to the establishment of a carbon boundary adjustment mechanism. In response, the European Commission’s response is to establish a carbon boundary adjustment. The mechanism and enjoy more free market shares can only choose one item, and the European Commission cannot bear the burden of double compensation and other additional risks.” Quinn said.

The commissioning of the third phase of the EU's carbon emissions trading system has just ended, and so far there has not been any carbon leakage accident. In the fourth phase of reform (designed to cover January 2021 to early 2030), the European Commission stated that it will also readjust the free allocation of steel companies to ensure that steel manufacturers receive adequate policy protection. At the same time, with regard to the request for an extension of the transition period proposed by the European Steel Manufacturers Association, the European Commission stated that it can be taken into consideration as an option to help companies decarbonize and reduce burdens.

Although the EU’s current carbon emission trading system has given companies sufficient protection against carbon leakage, high carbon prices have also greatly reduced the enthusiasm of steel companies to promote carbon emissions reduction. Perhaps the establishment of a carbon boundary adjustment mechanism can provide incentives The European steel industry has played a positive role in the development of decarbonization.

WTO Deputy Director-General Alan Wolff (Alan Wolff) said in a speech in February that communication and cooperation between various countries are essential to effectively avoid disputes over carbon tariffs. On March 5th, the WTO and 53 member states formed the World Trade and Environmental Sustainable Development Joint Initiative Group, which is expected to become a world forum for countries to deal with carbon tariff disputes and discuss carbon border adjustment mechanisms.