Impact of EU Carbon Border Adjustment Mechanism on China's electromechanical industry trade

Abstract

The EU Carbon Border Adjustment Mechanism (CBAM) aims to deal with carbon leakage, but in fact protects local industries through carbon tariffs. This paper intends to quantitatively analyze the impact of CBAM on the foreign trade of China's electromechanical industry. CBAM is divided into two scenarios: initial implementation in 2026 and comprehensive coverage in 2030. It innovatively uses the GTAP-E model to conduct simulation analysis in terms of output, exports, prices and profits. The GTAP-E model can innovatively simulate the future development trends of different indicators through dynamic recursion and generate a general equilibrium architecture including energy modules. It is an innovative point different from existing research directions. CBAM has little impact on the output of China's electromechanical industry, but it has a huge impact on the export structure. China's electromechanical industry's exports to Europe will suffer huge impairment under CBAM, and the export gap will be filled by other major countries in the world., the total export value will also be impaired to a certain extent to confirm the irreplaceability of the EU's exports to China's electromechanical industry. The electromechanical industry needs to bear the negative impact of CBAM in both terms of income and costs. The pre-tax price of exports is reduced, domestic investment in China is reduced, and labor wages are reduced, squeezing the profits of the electromechanical industry from multiple levels. To this end, China should improve the carbon market and promote the development of green technologies to deal with the carbon tariff issue.