Green Steel Revolution: New Export Opportunities for China under EU Carbon Tax Policy

Green Steel Revolution: New Export Opportunities for China under the EU Carbon Tax Policy
Under the global wave of carbon neutrality, the implementation of the EU Carbon Border Adjustment Mechanism (CBAM) is profoundly reshaping the international competitive landscape of the steel industry. This article comprehensively analyzes the latest revision of the EU carbon tax policy and its multi-dimensional impact on China's steel exports, revealing the challenges and potential opportunities faced by Chinese steel companies in the green transformation. From the expansion of exemption policies, simplification of calculation rules to the extension of compliance nodes, the new EU carbon tariff regulations provide Chinese companies with a valuable buffer period; at the same time, China's steel industry is gradually building global competitive advantages through hydrogen metallurgical technology innovation, promotion of short-process electric furnaces and low-carbon product certification. The article will also explore in depth how to transform carbon constraints into new momentum for high-quality development through strategies such as carbon market linkage, regional coordinated carbon reduction and international production capacity layout, helping Chinese steel companies seize new export opportunities in the green steel revolution and achieve a strategic transformation from "carbon cost" to "carbon advantage".

Analysis of the EU's new carbon tariff policy: Exemption expansion and transition period dividends
In March 2025, the European Commission officially adopted a revised proposal for the Carbon Border Adjustment Mechanism (CBAM), which provided significant space for reducing burdens and increasing efficiency for EU exporters outside the EU, including China, and EU importers through a policy combination of "exemption + simplification + extension". If this revision is passed, it will directly affect my country's exporters in industries such as steel, aluminum, fertilizers, and cement, especially the steel industry, which accounts for 76% of China's exports to the EU12.

The significant reduction in the exemption threshold is one of the most prominent highlights of the new policy. The latest proposal proposes a "50-ton" threshold, that is, EU importers and corresponding exporters whose annual cumulative imports of related products are less than 50 tons will benefit directly. Compared with the "120 euros" standard set by the original regulations, the scope of exemption has been greatly expanded1. For eligible companies, importers only need to check the "occasional importer" status when declaring customs to be exempted from the CBAM authorization, declaration and purchase certificate obligations, but they need to monitor the import volume by themselves. Once it exceeds 50 tons, they need to take compliance measures in time to avoid fines. For exporters, if the annual cumulative imports of all their EU importers do not exceed 50 tons, the company will be exempted from calculation and does not need to pass on information such as embodied carbon emissions to importers1. This adjustment is particularly beneficial to China's small and medium-sized steel exporters and special steel suppliers, lowering the initial threshold for them to enter the EU market.

In terms of emission calculation rules, the proposal removes restrictions on the use of default values, allowing importers to freely choose actual emission data or default values ​​provided by the EU1. This change effectively solves the problem of "difficulty in obtaining data" in the exporter supply chain, which means that exporters may be exempted from calculation or use default values ​​instead of actual emission values ​​of precursor materials. In addition, downstream processing emissions of some aluminum and steel products are not included in the calculation, and emissions of precursor materials produced in the EU and paid for carbon prices are also zero1. These simplified rules will significantly reduce the compliance costs of Chinese steel companies, especially for those companies whose supply chain carbon emission data collection systems are not yet perfect.

The introduction of the carbon price deduction mechanism creates potential price advantages for Chinese exporters. The EU will set a default carbon price for third countries based on public data, and importers can directly use this value to deduct the carbon fee of imported products1. As China's carbon market expands, large-scale production enterprises such as steel and cement will be included in the control, and carbon prices will also rise with the control of total carbon emissions. It is foreseeable that China's exports of steel, aluminum and other products to the EU will have a cost advantage over other products from countries/regions that have not established carbon markets. At the same time, exporters do not need to ask upstream suppliers such as steel mills for the compliance costs of my country's carbon market, which reduces communication costs and coordination pressure1.

In terms of procedural simplification, the proposal intends to simplify the authorization procedures for authorized representatives, introduce the identity of CBAM representatives, and allow importers to entrust third parties (such as consultants or environmental experts) to submit declarations and calculate implicit emissions on their behalf1. This adjustment will help Chinese export companies that lack professional carbon management teams to meet EU compliance requirements more conveniently.

The postponement of compliance nodes provides companies with a more relaxed adaptation period. For the collection period starting in 2026, the first purchase date of CBAM certificates is proposed to be postponed to February 1, 2027, and the corresponding compliance nodes will also be postponed1. Specific adjustments include: the deadline for annual declaration and certificate submission is postponed to August 31; the deadline for certificate repurchase is postponed to September 30; the certificate cancellation date is postponed to October 11. This extension has bought more time for Chinese steel companies to calculate the embodied carbon emissions of their products and improve their internal carbon management systems.

Relief of financial pressure is another important benefit. The price of CBAM certificates will be adjusted from the previous weekly average closing price of the EU ETS to the average price calculated on a quarterly basis1. This adjustment will make the certificate price more stable and predictable, reducing the uncertainty caused by weekly price fluctuations. At the same time, the proposal intends to optimize the proportion of certificate holdings and purchase methods, reducing the proportion of CBAM certificates that importers must hold each quarter from 80% to 50%, providing companies with more room for capital turnover, and allowing them to more reasonably arrange the purchase and holding of certificates based on their own financial conditions and market conditions1.

Table: Comparison of major changes in the EU CBAM revised proposal

Policy dimension Original rules Revised rules Impact on Chinese steel exporters
Exemption threshold 120 euros 50 tons of annual cumulative imports More small and medium-sized enterprises can enjoy exemptions
Emission calculation Strictly limit the use of default values ​​Cancel the limit on the use of default values ​​Reduce the burden of data collection and calculation
Compliance node Collection starts in early 2026 The first purchase is postponed to February 2027 Extend the adaptation and preparation time
Certificate price Calculated by weekly average price Calculated by quarterly average price More stable and predictable prices
Holding ratio 80% must be held each quarter Reduced to 50% Reduce the pressure on capital occupation
Although the EU's new carbon tariff policy provides a number of convenient measures, Chinese steel exporters still need to realize that the EU's tightening regulation of carbon emissions will not change. Enterprises should make full use of this policy buffer period to optimize internal strategies: accurately count export data, comprehensively sort out the net export weight of CBAM-controlled products, and simultaneously confirm the exemption qualifications of importers; evaluate the cost-effectiveness of using default values ​​and conducting actual calculations, and prepare data in advance to cope with future verification work; complete the registration of accounts on third-country platforms as soon as possible, and upload emission data in a timely manner; continue to track regulatory trends, pay attention to the industry expansion list and data verification details, and simultaneously connect with domestic carbon market quota management to build a collaborative strategy1.

Impact mechanism and cost analysis of carbon tariffs on China's steel exports
The implementation of the EU Carbon Border Adjustment Mechanism (CBAM) will fundamentally change the cost structure and competitiveness of China's steel products exported to the EU. As the world's largest steel producer and exporter, China's steel industry will account for 53.97% of the world's total crude steel output in 2023. Among the six major categories of products affected by CBAM, steel accounts for 76% of China's total exports to the EU2. This data highlights the significant impact of carbon tariff policies on China's steel industry, and we need to deeply analyze its mechanism of action and cost transmission path.

CBAM tax calculation model and cost increase estimate
The core calculation logic of the EU carbon tariff is based on the "carbon price difference" principle. The specific formula is: CBAM carbon tariff = CBAM certificate price × carbon emissions = (ETS carbon trading system price - product origin country carbon price) × (product carbon emissions - free quotas obtained by similar EU products)27. Among them, the ETS carbon trading price is the average closing price of the EU carbon emission trading platform in the previous week, which is currently about 90 euros/ton; the carbon price of the product origin country can only be reduced if the carbon price has been effectively paid by the country of origin; the free quotas obtained by similar EU products will be reduced year by year as planned until they are completely cancelled in 20342.

Based on this calculation model, we can make a preliminary estimate of the carbon tariff burden on China's steel exports to the EU. Based on the 4.05 million tons of steel exported by China to the EU and the UK in 2022, assuming the average carbon price in the EU carbon market is 83.6 euros/ton, the average carbon emission intensity of China's steel industry is 2.15 tons of carbon dioxide/ton of steel, and the average carbon emission intensity of the EU steel industry is 1.68 tons of carbon dioxide/ton of steel7. Without considering the impact of China's carbon market, Chinese steel products will be subject to taxes of nearly 42.8 euros/ton (about RMB 330) in 2026, which is 38 euros/ton higher than domestic EU steel products. As the free quota is gradually cancelled, by 2034, the tax per ton of steel will reach 179.8 euros/ton (about RMB 1,380), and the total tax will reach 730 million euros7.

It is worth noting that there are significant differences in the carbon emission intensity of different steel companies in China. Taking Baosteel as an example, its carbon emission intensity is lower than that of European companies such as AM Group and ThyssenKrupp. Therefore, the carbon tariffs paid by Baosteel's steel products exported to Europe are lower than those of these European counterparts, and it has certain competitive advantages7. This phenomenon shows that the carbon tariff policy is actually forcing Chinese steel companies to accelerate their low-carbon transformation and reduce carbon emission intensity through technological innovation, thereby maintaining or even enhancing their international competitiveness.

Cost differentiation caused by differences in production processes
The structural differences in steel production processes between China and the EU are the key factors leading to the uneven impact of carbon tariffs. At present, China's steel production is still dominated by the blast furnace-converter long process, and the electric furnace short process steelmaking accounts for only 10%, while the proportion of the EU electric furnace short process has reached 40%2. This process difference is directly reflected in the carbon emission intensity - the carbon emission per ton of steel using the electric furnace short process is about 70% lower than that of the long process2. According to domestic data, the implementation of CBAM will increase the cost of Chinese steel exports to the EU by 652 to 690 yuan2.

High value-added varieties such as plates account for a high proportion of China's steel exports to Europe. These products are mainly produced using the blast furnace-converter long process and may require more complex production processes, with a higher carbon emission intensity per ton of steel2. This means that China's high-end steel products for export are facing greater carbon tariff pressure, which may weaken the competitiveness of Chinese steel companies in the high-end market.