Carbon tax: How Chinese exporters must prepare to provide data ahead of the EU’s world-first emissions duty on imports

Exporters of certain carbon-intensive products – including those in China – have six more months to set up systems to collect, calculate and report emissions data to help their European customers meet disclosure requirements ahead of the launch of the world’s first carbon duty on imports, according to a tax expert.

Those that fail to provide greenhouse-gas emissions data on their products may risk being dumped by their customers when the European Union starts requiring importers to submit actual data from the third quarter of 2024, said Andrea Yue, a Beijing-based partner at Ernst & Young (China) Advisory.

For the three quarters up until the end of June this year, importers have been allowed to use “default” estimates – preset world averages – in their disclosure filings. After that, EU importers may require Chinese exporters to provide actual data for declaration purposes.

Reliable data is required to determine the carbon tax, which the EU is imposing from 2026. Called the Carbon Border Adjustment Mechanism (CBAM), it will be based on the emissions of the imported products and the prevailing EU carbon quota price, less any carbon tax paid in the exporter’s home country.

“The CBAM is a revolutionary development, since this is the first time globally for a tax to be imposed on the greenhouse-gas emissions of an exported product,” Yue told the Post. “Governments in other regions, such as North America, are also considering similar taxes. I believe this will become an international trend.”

The reporting and tax regime applies to six types of emissions-heavy goods: electricity, steel, aluminium, cement, chemicals and hydrogen. It will be implemented in a phased manner. Non-compliant importers could be liable to fines of €10 (US$10.70) to €50 per tonne of unreported emissions.