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Global warming

EU's Carbon Border Adjustment Mechanism to Reduce Embodied Carbon Emissions in Global Steel Trade

Strategic Insights

— 2 min read

The European Union has devised the Carbon Border Adjustment Mechanism (CBAM) to apply carbon tariffs on select imports of carbon-concentrated goods starting in 2026. The mechanism aims to encourage the development of carbon-reducing technologies and promote the reduction of embodied carbon emissions in global steel trade. A recent study conducted by researchers from North China Electric Power University used a multi-regional input-output model to calculate the embodied carbon emissions in global steel trade and projected the emissions intensity of major steel-producing economies during the period of 2026-2034.

Key Takeaways:

  • The EU's Carbon Border Adjustment Mechanism will apply carbon tariffs on select imports of carbon-concentrated goods starting in 2026, affecting the global steel trade.
  • The mechanism will encourage the development of carbon-reducing technologies and promote the reduction of embodied carbon emissions in global steel trade.
  • The study projected that after the duty-free quota is eliminated in 2034, CBAM will encourage major steel-producing economies to reduce the embodied carbon emissions in steel exports to the EU by 25.9 million tons and the world by 625.9 million tons annually.
  • The reduction in embodied carbon emissions in steel exports to the EU and the world will be 31% and 21% compared to the no-CBAM scenario, respectively.
  • The study recommended making recommendations based on the calculations discussed and the typical analysis of each economy.
  • The researchers used a multi-regional input-output model and the Bat Algorithm Optimized Extreme Learning Machine to calculate and project the embodied carbon emissions intensity of major steel-producing economies during the period of 2026-2034.
  • The study has been peer-reviewed and published in the journal Energy Sources Part B-Economics Planning and Policy.
  • The authors of the study include Can Lu, Wei Li, Xing Liu, and Xiue Yuan from North China Electric Power University.

Statistics:

  • 25.9 million tons: Reduction in embodied carbon emissions in steel exports to the EU annually after the duty-free quota is eliminated in 2034.
  • 625.9 million tons: Reduction in embodied carbon emissions in steel exports to the world annually after the duty-free quota is eliminated in 2034.
  • 31%: Reduction in embodied carbon emissions in steel exports to the EU compared to the no-CBAM scenario.
  • 21%: Reduction in embodied carbon emissions in steel exports to the world compared to the no-CBAM scenario.
  • 2026: The year in which the EU's Carbon Border Adjustment Mechanism will come into effect.
  • 2034: The year in which the duty-free quota will be eliminated.

Sources:

  • Impact of Cbam On Carbon Emission Reduction In Global Steel Foreign Trade: Projections Based On the Embodied Carbon Emission Intensity of Major Countries. Energy Sources Part B-Economics Planning and Policy, 2024;19(1).
  • NewsRx. Researchers from North China Electric Power University Report on Findings in Economics Planning and Policy (Impact of Cbam On Carbon Emission Reduction In Global Steel Foreign Trade: Projections Based On the Embodied Carbon Emission Intensity ...). Global Warming Focus. May 26, 2025; p 656.

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