After nearly two years of negotiations, the European Parliament officially approved the EU Carbon Border Regulation Mechanism (CBAM) after voting. This means that the world’s first carbon import tax is about to be implemented, and the CBAM bill will come into effect in 2026.
China will face a new round of trade protectionism
Under the influence of the global financial crisis, a new round of trade protectionism has emerged, and China, as the world’s largest exporter, has been deeply affected.
If European and American countries borrow climate and environmental issues and impose “carbon tariffs”, China will face a new round of trade protectionism. Due to the lack of a unified carbon emission standard internationally, once countries such as Europe and America impose “carbon tariffs” and implement carbon standards that are in their own interests, other countries can also impose “carbon tariffs” according to their own standards, which will inevitably trigger a trade war.
China’s high-energy export products will become the subject of “carbon tariffs”
At present, the countries proposing to impose “carbon tariffs” are mainly developed countries such as Europe and America, and China’s exports to Europe and America are not only large in quantity, but also concentrated in high-energy consuming products.
In 2008, China’s exports to the United States and the European Union were mainly mechanical and electrical products, furniture, toys, textiles, and raw materials, with total exports of $225.45 billion and $243.1 billion, respectively, accounting for 66.8% and 67.3% of China’s total exports to the United States and the European Union.
These export products are mostly high energy consuming, high carbon content, and low value-added products, which are easily subject to “carbon tariffs”. According to a research report from the World Bank, if the “carbon tariff” is fully implemented, Chinese manufacturing may face an average tariff of 26% in the international market, leading to increased costs for export-oriented enterprises and a possible 21% decline in export volume.
Does carbon tariffs have an impact on the textile industry?
Carbon tariffs cover imports of steel, aluminum, cement, fertilizers, electricity, and hydrogen, and their impact on different industries cannot be generalized. The textile industry is not directly affected by carbon tariffs.
So will carbon tariffs extend to textiles in the future?
This should be viewed from the policy perspective of carbon tariffs. The reason for implementing carbon tariffs in the European Union is to prevent “carbon leakage” – referring to EU companies transferring production to countries with relatively loose emission reduction measures (i.e. industrial relocation) in order to avoid the high carbon emission costs within the EU. So in principle, carbon tariffs only focus on industries with a risk of “carbon leakage”, namely those that are “energy intensive and trade exposed (EITE)”.
Regarding which industries are at risk of “carbon leakage”, the European Commission has an official list that currently includes 63 economic activities or products, including the following items related to textiles: “Preparation and spinning of textile fibers”, “Manufacturing of non-woven fabrics and their products, excluding clothing”, “Manufacturing of man-made fibers”, and “Textile fabric finishing”.
Overall, compared to industries such as steel, cement, ceramics, and oil refining, textile is not a high emission industry. Even if the scope of carbon tariffs expands in the future, it will only affect fibers and fabrics, and it is highly likely to be ranked behind industries such as oil refining, ceramics, and paper making.
At least in the first few years before the implementation of carbon tariffs, the textile industry will not be directly affected. However, this does not mean that textile exports will not encounter green barriers from the European Union. The various measures being developed by the EU under its “Circular Economy Action Plan” policy framework, especially the “Sustainable and Circular Textile Strategy”, should be given attention by the textile industry. It indicates that in the future, textiles entering the EU market must cross a “green threshold”.
Post time: May-16-2023