EU Carbon Tariffs Take Effect Today, Creating "Green Opportunities" for the Photovoltaic Industry

Yesterday, the European Union announced the official publication of the Carbon Border Adjustment Mechanism (CBAM) legislation in the EU Official Journal. CBAM will become effective the day following publication – May 17th. This marks the completion of all procedures for the EU carbon tariff to formally enter into force today.

What is the Carbon Tariff?
CBAM constitutes a core component of the EU's "Fit for 55" emissions reduction package, which targets a 55% reduction in carbon emissions from 1990 levels by 2030. To achieve this, the EU has implemented 12 new legislative measures including:

Expanding renewable energy adoption
Broadening the EU carbon market
Halting fuel vehicle sales
Establishing the carbon border mechanism

In simplified terms, the EU imposes charges on high-carbon-emission products imported from third countries based on their embedded emissions.

Primary Objectives
The EU introduced carbon tariffs primarily to address "carbon leakage" – a challenge arising from climate policies where EU manufacturers relocate to regions with lower environmental standards, resulting in no net global reduction in CO₂ emissions. The mechanism aims to:

Protect EU producers subject to strict carbon controls
Increase costs for external producers with weaker emission targets
Prevent EU companies from shifting operations to lower-emission-cost countries

Concurrently, reforms to the EU Emissions Trading System (EU-ETS) will phase out free carbon allowances completely by 2032, further increasing producer costs.

Implementation Timeline & Scope
CBAM initially covers cement, steel, aluminum, fertilizers, electricity, and hydrogen – sectors with high carbon intensity and leakage risk. Implementation will proceed as follows:

Trial period: October 1, 2023 - December 31, 2025
Full implementation: January 1, 2026
During operation, importers must annually declare imported goods quantities and embedded greenhouse gases, purchasing corresponding CBAM certificates priced according to weekly EU ETS allowance auctions (EUR/t CO₂). Free allowance phase-out will occur parallel to CBAM implementation from 2026-2034.

Impact on China
As the EU's largest trading partner and primary source of embodied carbon emissions in imports, China faces significant implications:

80% of carbon emissions from China's EU-bound intermediate products originate from metals, chemicals, and non-metallic minerals – high-risk sectors under CBAM
Estimated impact: 5-7% of China's total exports to Europe affected
Projected export reduction: 11-13% for CBAM-covered sectors
Additional annual costs: $100-300 million (1.6-4.8% of covered exports)

Sectoral Example: Steel Industry
China's steel sector faces particular challenges:

Per-ton carbon emissions gap: 1 ton vs. EU standards
Estimated impact: ¥16 billion trade volume effect
Tariff increase: ~¥2.6 billion
Cost increase: ~¥650/ton steel (11% tax burden rate)

Opportunities and Challenges
While increasing export pressure, CBAM also presents opportunities:

Carbon Market Development:
- China's carbon market remains nascent
- Current carbon prices don't fully reflect enterprise costs
- Enhanced EU communication needed to account for non-pricing factors
Clean Technology Advancement:
- Traditional industries must pursue "quality enhancement and carbon reduction"
- Photovoltaic and new energy sectors may gain "green opportunities"
- Potential export stimulus for China's PV industry

Possible increase in European clean energy technology investments by Chinese firms