The impact of carbon tariff expansion on chemical industry

On June 22, the European Parliament approved amendments to the draft Carbon Border Adjustment Mechanism (CBAM) by a majority vote
.
This marks the official implementation of the world's first "carbon tax" mechanism on imported products, and the chemical industry will be the first to be hit
.

The amendment has four additions
.
First, organic chemicals, plastics, hydrogen and ammonia are added to the carbon tariffs imposed on the five industries of iron and steel, aluminum, cement, fertilizer and electricity; second, in addition to accounting for direct emissions, carbon tariffs are levied.
The scope is expanded to indirect emissions, including carbon emissions from electricity used by manufacturers; third, carbon tariffs will be phased in from 2027
;

The amendment to the carbon boundary adjustment tax will expand the scope of carbon tariff collection to indirect emissions, and include organic chemicals and plastics in the collection scope, which will have a significant impact on the export of products in China's chemical industry
.
Statistics from the General Administration of Customs show that in 2021, China's organic chemicals exports to the EU will amount to 100.
5 billion yuan, accounting for about 18% of the total domestic organic chemicals exports; plastics and their products will account for about 13% of exports to the EU; fertilizers The proportion of exports to the EU is relatively small
.
In terms of export share, organic chemical exports are most affected by carbon tariffs
.

From the analysis point of view, the impact of carbon tariffs on the production cost and international competitiveness of my country's chemical industry is mainly reflected in the following aspects:

First, the carbon tariff will increase the export cost of the chemical industry
.
The chemical industry is a high carbon emission industry in China, and power consumption accounts for a large proportion of the total chemical energy consumption.
If CBAM charges a higher carbon emission tariff, the export cost of China's chemical products will greatly increase in the short term
.
Taking the statistics of the General Administration of Customs in 2021 as an example, China’s organic chemicals exports to the EU in that year amounted to 100.
5 billion yuan (about 14.
779 billion U.
S.
dollars), accounting for 45% of the total export of chemical products, and the total carbon dioxide emissions were 91.
16 billion yuan.
In 10,000 tons, when the carbon tax is US$60/ton and US$90/ton, the export cost of organic chemicals will increase by US$5.
46 billion and US$8.
2 billion, accounting for 37% and 56% of the total export value
.
In addition, for the chemical industry, as the raw materials used are related to other industries that impose carbon tariffs, they will also face the problem of increasing the cost of upstream raw materials
.

Second, the carbon tariff will intensify the market competition of China's basic bulk chemical products
.
The new CBAM proposal includes organic chemicals into the collection scope.
Countries such as the United States and Japan that export more chemicals and related products to the EU may turn to increase exports to China in order to avoid taxes, resulting in more intense competition in the domestic petrochemical product market
.

Third, carbon tariffs will lead to more challenges for the plastics industry in the future
.

As for the EU CBAM mechanism, China's petroleum and chemical industries, which have high carbon emissions, must actively respond and plan as soon as possible
.
On the one hand, it is necessary to closely follow up and conduct in-depth research on policies, and make arrangements in advance
.
The EU has a leading position in the design and implementation of carbon tariffs in the world.
It is necessary for domestic companies to continue to track and study and learn from its carbon emission reduction policies and technological progress, and at the same time, incorporate the impact of carbon tariffs into the industry's "dual carbon" action plan
.

On the other hand, domestic petrochemical enterprises should also strengthen the capacity building of carbon emission management
.
Explore the establishment of institutional systems, standard systems and data platform systems for monitoring, evaluating and reporting product carbon footprints and carbon costs, carry out carbon emission management for the entire life cycle of enterprises, and explore low-carbon certification of chemical products
.

In addition, key domestic petroleum and chemical enterprises should increase investment in technology and equipment in accordance with the requirements of the newly released "Guidelines for the Implementation of Energy Conservation and Carbon Reduction Transformation and Upgrading in Key Fields of High Energy-consuming Industries (2022 Edition)", and speed up the energy conservation of key products and key enterprises.
Transformation and upgrading of carbon reduction
.