The Impact of the Carbon Border Adjustment Mechanism (CBAM) on China's New Energy Vehicle Exports to the European Union

Abstract

With the increasingly strong call for energy conservation and emission reduction on the international stage, countries and regions such as the United States, the European Union, and Japan have begun to prepare for legislation on the collection of carbon tariffs. To address climate change, the European Commission has also proposed a series of proposals. The CBAM will open up another important track for global efforts to combat climate change. The product categories initially included in the CBAM's collection scope have been revised several times during the legislative process and have finally been determined to be cement, electricity, fertilizers, steel, aluminum, and chemical products (hydrogen). The automotive industry, including new energy vehicles, power batteries, auto parts, automotive metal raw materials, and the hydrogen fuel cell vehicle industry chain, will all be affected. As a key component of new energy vehicles, the carbon emissions during the manufacturing stage of power batteries typically account for about 30% of the total emissions of new energy vehicles, which will bring new export challenges to China's automotive industry enterprises. This paper uses the input-output method to calculate the embodied carbon emissions of new energy vehicle exports based on the input-output table and export data of automotive products, providing data support for calculating the carbon tariff rate imposed on China's new energy vehicle products. Subsequently, this paper analyzes the impact of the CBAM on the export volume, market price, and social welfare of China's automotive products from both theoretical and empirical perspectives. Finally, in the face of the challenges posed by the EU carbon tariff to China's new energy vehicle industry, several forward-looking measures are proposed from two levels: the government and the automotive enterprises.