COP29: China to seek inclusion of CBAM in official COP30 agenda in Brazil, official says

China will lobby for the carbon border adjustment mechanism (CBAM) to be on the official agenda for next year's UN Climate Change Conference to be hosted by Brazil, as part of multilateral discussions ahead of the event, Zhao Yingmin, head of China's climate delegation, told S&P Global Commodity Insights on Nov. 15 on the sidelines of COP29.

The final COP29 agenda in Baku, Azerbaijan this year did not include this sensitive topic, despite BASIC countries, namely Brazil, South Africa, India, and China, asking for CBAM to be part of the official agenda before the event began.

The countries had asked for the inclusion of "climate change-related, trade-restrictive unilateral measures" like the EU's CBAM to be discussed at Baku.

"Even though CBAM is not included in this year's agenda, China's stance remains unchanged. CBAM is a unilateral measure that increases the costs and slows the progress for global decarbonization," Zhao, who is also Deputy Minister of China's Ministry of Ecology and Environment, said.

He said the final COP30 agenda will depend on multilateral discussions that will take place next year. "China always respects multilateral practices," he added. Zhao oversees the country's climate actions, international climate-related collaborations, and carbon market development.

China and its BASIC allies are expected to be heavily affected by the EU's CBAM, which imposes a carbon tariff on emission-intensive commodities imported by the EU, including aluminum, cement, electricity, fertilizers, hydrogen, iron, and steel.

The purpose of CBAM is to level the playing field for domestic companies, as most exporting countries do not have a carbon price as high as EU ETS, or do not have a price on emissions at all. The EU has also requested for discussions on this issue through the World Trade Organization, instead of COP.

CBAM is currently in its transitional reporting phase, with the carbon levy set to formally start in 2026.

Ripple effect

BASIC and other developing economies are wary of the ripple effect that an increasing number of CBAM-like policies could have on them, especially with the US also mulling similar proposals.

"As climate change issues become more and more closely linked to economic and trade issues, international trade rules and policies are also undergoing significant changes," Lü Wenbin, Director of the Energy Research Institute under China's National Development and Reform Commission (NDRC), said Nov. 12 at COP29.

Lü noted the EU's CBAM, battery regulations, and the inclusion of international shipping in EU ETS. He said the G7 member states, such as the UK, US, Canada, and Japan, have also successively considered CBAM-like policies.

"These measures affect both global trade patterns and global decarbonization," he said, highlighting the importance of having multilateral discussions about these climate change-related trade measures at both WTO and COP to ensure consensus.

CBAM is likely to impose significant costs on developing countries because they do not have comparable carbon intensities or carbon prices with Global North countries.

Platts, part of Commodity Insights, assessed EU Allowances for December 2024 at Eur68.26/mtCO2e ($71.96/mtCO2e) on Nov. 14.

China's compliance emission allowance, or CEA was at Yuan 105.09/mtCO2e ($14.54/mtCO2e) on Nov. 14, according to the Shanghai Environment and Energy Exchange. The CEA price has doubled since the national compliance market was launched in July 2021.

Between 2026 to 2040, China is expected to export 868.94 million mt of CBAM-liable commodities, 42% of which relate to iron and steel, 8% to cement, and 6% to aluminum, forecasts from Commodity Insights showed.