EU to blunt China’s edge on steel, aluminium exports as proposed carbon tax could reach 21%: Goldman

The European Union is tightening the screws on carbon-intensive imports such as steel and aluminium to level the playing field for domestic producers

Under the EU Carbon Border Adjustment Mechanism a tax of 6 per cent will be levied on steel in 2026, which will rise to as much as 21 per cent in 2034, Goldman estimates

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China’s steel exports to the EU could be affected as the 27-nation bloc imposes a carbon tax starting in 2026. Photo: CFOTO/Future Publishing via Getty Images

Published: 6:54pm, 14 Feb 2024Updated: 8:57pm, 14 Feb 2024

The European Union’s move to implement the world’s first tax on carbon-intensive imports from 2026 could badly hit Chinese steel and aluminium makers, according to Goldman Sachs.

The 27-nation bloc is tightening the screws on imported steel, aluminium, cement, hydrogen, fertiliser and electricity with higher greenhouse gas emissions to level the playing field for domestic producers.

The tariff under the EU Carbon Border Adjustment Mechanism (CBAM) in the first year on steel will be 6 per cent before rising to as much as 21 per cent in 2034, Goldman’s analysts estimated. While the levy is seen as a protectionist move by China and India, it forms part of an EU policy to reach net zero carbon emissions by 2050.

The CBAM aims to level the playing field for EU producers of carbon-intensive goods as free emissions allowances issued under the EU’s Emissions Trading Scheme (EU ETS) are gradually phased out, the US investment bank’s analysts said in a report on Monday.

The EU proposes to implement a 6 per cent tax on carbon-intensive sectors such as steel from 2026. Photo: Xinhua

“By subjecting certain imported goods to a carbon price equivalent to requirements for domestic EU production, the EU intends to mitigate any competitive disadvantage to imports from nations without carbon pricing mechanisms.”