Study On The Impact Of CBAM On China’s Carbon Emissions And Welfare

On July 14,the EU 2021 the world’s first carbon tariff policy with the enactment of the EU’s proposed legislation to establish a carbon border adjustment mechanism.And on February9,European Time 2023,the European Parliament’s Committee on Environment,Public Health and food safety（ENVI）voted for the revised emissions trading system（ETS）and the Carbon Border Adjustment Mechanism（CBAM）.As the EU is China’s second-largest export market,the implementation of this policy will directly affect China’s exports to the EU,which in turn will have an impact on China’s carbon emissions and national welfare.Other developed countries,led by the US,which is returning to the Paris agreement,are also considering“Carbon tariffs”and trying to link trade to environmental standards,the formation of a“Carbon market and carbon tariffs”as the core of the new global climate governance order.For China,which is still in the critical period of industrial structure transformation,the possible impact will be great.Therefore,it is of great practical significance to explore the impact of the implementation of CBAM on China.Due to the limited research space,this thesis only explores the potential impact of the implementation of CBAM on China’s carbon dioxide emissions and welfare.First of all,this thesis reviews the impact of the existing CBAM on China,and reviews the development of the CBAM,it also sets out the key events before and after the commencement of the CBAM legislative process,which was formally 2021 in July.Secondly,in this thesis,the main points of the proposal and the amendments to the European Parliament’s proposed legislation on the establishment of a carbon border adjustment mechanism by the European Parliament and the council（hereinafter referred to as the amendments）are described,the potential impact of the CBAM on China’s carbon emissions and welfare is discussed through qualitative analysis.Then,in the aspect of quantitative research,a theoretical model based on Armington model is constructed,and the price index equation,cost equation and trade equation are enumerated,the equations of price index change,production cost change,trade cost change,carbon emission change and welfare change are derived.Finally,combined with input-output,tariff,carbon price and other data,in accordance with the relevant provisions of the latest amendment,under different collection standards,simulating the potential impact of the implementation of the CBAM on China’s carbon emissions and welfare.First,under the US$27/t carbon dioxide levy,nine industries covered by the first phase and after the implementation of an industry-wide CBAM,while the rest of the world’s CO₂emissions are falling,those of the European Union（27 countries）are rising.This runs counter to the policy’s intent,so the CBAM can be seen as a more implicit form of new“Trade protectionism”.Second,after the implementation of the CBAM,with the increase in the levy standards（from$27/t of CO₂ to$60/t of CO₂ to$90/t of CO₂）,the negative impact of this policy on China’s exports to the European Union（27 countries）is increasing.Third,China’s carbon dioxide emissions have been reduced after the implementation of the CBAM,but the rate of reduction is very low,and as the levy increases（from$27/t of CO₂ to$60/t of CO₂ to$90/t of CO₂）,the impact of this policy is increasing.The reduction in CO₂ concentration in the simulation scenario is mainly due to the reduction in CO₂ emissions resulting from the reduction in exports.Fourth,in the simulation scenario under the$27/t CO₂ Levy,the implementation of the CBAM would harm China’s welfare,and as the levy increases（from$27/t of CO₂ to$60/t of CO₂ to$90/t of CO₂）,the damage to China’s welfare is growing.Fifth,a carbon border adjustment tax of$27 per tonne would be levied across the industry,compared with the nine industries covered in the first phase,China’s exports to the European Union（27countries）,carbon dioxide emissions,real income,carbon dioxide concentrations and welfare differences are not large,mainly because the first phase covers industries with high carbon content.Based on the above findings,this thesis suggests that the government should continue to promote China-EU climate cooperation under the framework of WTO trade and speed up the construction of domestic carbon market,reduce the carbon emission intensity of products,pay attention to the new trends of domestic and international carbon prices,and prepare for the development of new markets.