With the announcement of the implementation plan of the carbon border adjustment tax by the European Union, the world's first carbon border tax is approaching, and the carbon tariff has been controversial since it was proposed. However, a study by environmental groups Sandbag and E3G shows that EU carbon tariffs may not cost the target much.
The European Commission formally announced the carbon border tariff policy proposal in July, and the legislation is expected to be completed in 2022. The "transition period" will begin in 2023 and be fully implemented in 2026. The bill mainly targets energy and high-energy-consuming companies, including steel, cement, fertiliser and aluminum. According to the EU's plan, carbon emissions in the EU will be reduced by 55% from 1990 levels by 2030.
The study pointed out that the impact of the carbon boundary adjustment mechanism (CBAM) on EU trade importing countries will be very small, after tariff increases, these countries will raise prices to recover most of the costs, which will eventually be borne by EU consumers.
The United States is least affected by CBAM, with net costs of about 10 million euros ($11.829 million) by 2026 and rising to 25 million euros ($29.5725 million) by 2035, the report said. Russia was previously considered one of the countries hardest hit by CBAM, but the Sandbag report predicts that Russia will face a net cost of 600m euros ($709.7 million) by 2035, mainly from steel exports to the European Union.
It is worth mentioning that the Boston Consulting Group has previously predicted that without taking into account some of the free quotas provided by the carbon emissions trading system, based on the average size of Russian exports to the European Union from 2019 to 2020 and the expectation of an increase in prices, Russia may have to pay a related carbon tax of $1.8 billion to $3.4 billion in 2026, and this figure will reach $3.5 billion to $6.4 billion by 2030. If petroleum processing products and petrochemical products are included in the CBAM, Russia may have to pay a carbon tax of US $2.9 billion-6.4 billion by 2026 and US $5.5 billion-11.7 billion by 2030.
Although the EU hopes to curb greenhouse gas emissions through CBAM, studies have shown that CBAM is unlikely to play a big role, and Bertelsmann Stiftung, a German think-tank, estimates that CMAM can only reduce total carbon emissions by an additional 0.2 per cent. As a result, some analysts believe that the EU's implementation of CBAM is more of a threat to force other countries to keep pace with Europe in curbing climate change.
