On June 22, local time, the European Parliament passed three important draft EU laws related to climate change, involving the reform of the Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM) known as the "carbon tariff". Rule amendments, and the creation of the Social Climate Fund (SCF). The European Parliament has now begun preparations for negotiations with EU governments into the final stages of these drafts.

Carbon Border Adjustment Mechanism (CBAM)

The most talked-about of the three drafts adopted is the Carbon Border Adjustment Mechanism (CBAM), which requires imports of carbon-intensive products to comply fully with international trade rules to prevent offsetting EU greenhouse gas reductions by importing products made in non-EU countries. Effort.

CBAM Act Content Changes

Compared with the previous draft legislation of the European Commission, the content of the currently adopted bill has undergone great changes.

mainly include:

1. The start date of carbon tariffs has been postponed by one year: from 2027;

2. The European Parliament's proposal expands the product range of CBAM, adding organic chemicals, plastics, hydrogen and ammonia to the original steel, aluminum, electricity, cement, and fertilizers.

3. The emission categories for which carbon tariffs are levied are based on the collection of Scope 1 (direct emission) of imported products, and the collection of Scope 2 (indirect emission) carbon emission levy has been added. (Scope 1 emissions are direct emissions from resources owned and controlled by a company, and Scope 2 emissions are indirect emissions from a business from purchased energy (including electricity, steam, heating, and cooling). For many companies, purchased electricity is one of its largest sources of greenhouse gas emissions).

4. From 2027 to 2032, gradually cancel the free carbon emission allowances obtained by EU industries. Specifically, by 2027, the free allowances of these industries will be reduced to 93%, 84% in 2028, 69% in 2029, and 2030. 50% annually, 25% in 2031, and 0 in 2032.

CBAM Act Follow-up Process

The currently adopted "first reading" text is the amendment of the European Commission's "draft" by the European Parliament. Next, the European Council will conduct a "first reading" of the European Parliament's opinions. If the Council fully accepts the European Parliament's opinion, the bill is passed. Otherwise, the Council will formulate its own amendments and feed it back to the European Parliament. This will lead to "second reading" or even "third reading".

Impact on Chinese enterprises

The bill requires that any unregistered importer importing goods subject to carbon tariffs, or registered importers who fail to submit and submit CBAM electronic vouchers in full and on time to import goods subject to carbon tariffs, will be fined for each The equivalent of ton CO2 emissions is 100 euros, and increases accordingly with the changes in European CPI. In addition, EU member states can impose administrative or criminal penalties on businesses or individuals that fail to comply with CBAM regulations according to their national rules.

Carbon tariff policies This will pose significant challenges for companies with high greenhouse gas emissions. The latest research report of Boston Consulting Group (BCG) analyzed in-depth the economic impact of EU carbon tariffs on key industries, and found that the impact of carbon tariffs on industry profits can be as high as 40%. Impact. Carbon tariffs could also change the competitive advantage of companies exporting to the EU.

Taking the steel industry as an example, Chinese steel companies have to pay high carbon tariffs when exporting to the EU because of their high carbon emissions. Compared with steel companies with higher carbon efficiency in other countries, the cost advantage of China's export of steel will be reduced. In addition, the European Union now requires companies to assess, report, and calculate the carbon footprint cost of their products, and the EU may soon impose the same requirements on companies exporting products to Europe amid doubling global pressure to reduce emissions. In the context of the global low-carbon transition, Chinese companies should respond positively and consolidate their market competitiveness.

Statistics show that China's energy structure, "rich in coal, poor in oil, and less in gas", is now the world's largest energy consumer. In 2020, the energy consumption will be equivalent to nearly 5 billion tons of standard coal, and the carbon emissions will be nearly 10 billion tons. It is also the world's largest energy consumption country. China is the largest carbon emitter in the world, accounting for about 28% of the world's carbon emissions. Our carbon emissions exceed the sum of the emissions of the three major economies of "US + EU + Japan", which is about 2 times that of the US and 3 times that of the EU. China's special envoy for climate change, Xie Zhenhua, recently pointed out that my country's coal consumption still accounts for more than 50% of the total. my country's energy consumption per unit of GDP is 1.4 times that of the world average and 2.1 times that of developed countries, while my country's carbon emission intensity per unit of energy is the world average. 1.3 times.

Compared with traditional energy sources, photovoltaic, wind power, and hydrogen energy are all secondary energy sources, which are not affected by materials, space, and resources, and because photovoltaic and wind power are already economical, especially in Europe, people of various countries use new energy sources. Willingness is high.

Two other climate drafts passed by the European Parliament on June 22 are as follows:

Emissions Trading System Reform

According to Reuters, the European Union's carbon emissions trading system will force power plants and industrial companies to buy carbon dioxide emissions permits when they generate environmental pollution, and cap the number of emissions from their permits.

In its first vote this month, the European Parliament was divided on whether to strengthen or weaken the carbon emissions trading system. At that time, it was proposed that by 2030, the total emissions of the industries covered by the carbon emissions trading system should be reduced by 61% compared with 2005. The draft proposes to increase that reduction to 63 percent. Meanwhile, lawmakers voted to reduce the market's CO2 caps by 4.4% from 2024, 4.5% from 2026, 4.6% from 2029, and cancel 70 million emissions permits in 2024, 2026 50 million emission permits are cancelled each year.

Create a Social Climate Fund

The European Parliament also agreed on the creation of a social climate fund to help the poorest people most affected by energy and transport cope with the increased costs of the energy transition. The draft makes clear that the Social Climate Fund will benefit households, small businesses and more. The Social Climate Fund will support financial resources on two fronts, including temporary direct subsidy measures such as lowering energy-related taxes and fees in response to rising road transport and heating fuel prices, and long-term structural investments, including building renovations , investing in renewable energy, directing people to public transport, etc.