Yu Lingling

                                                                                              School of Finance and Trade

Abstract: In recent years, some developed countries or regions, such as the United States, European Union, often proposed introduction of punitive carbon tariff on imports from China or India etc. on the basis of carbon content, which caused fierce discuss in international community. If it is calculated by the unit of a country, then according to the statistics of International Energy Agency, China has become the largest emitter of greenhouse gases since 2007. Meanwhile, China has become the largest exporting country since 2009. However, as the largest developing country in the world, China is not binding to the reduction commitment under the United Nations Framework Convention on Climate Change. The carbon tariff scheme was put forward in the above-mentioned background. In view of the following facts that Chinese export is highly dependent on the the markets of the United States and European Union, Chinese exporting products are carbon intensive, so the imposition of carbon tariff on Chinese exports would do a great damage to Chinese export trading. How to take effective countermeasures under the double pressures from home and abroad to ensure the emitting space and maintain development rights, enhance national competitiveness, and fight for the power to set the rules and discourse rights in international climate change cooperation has become the thorny issue facing China. So, study on carbon tariff is of great theoretical value and practical significance.

The thesis is divided into 6 chapters.

Chapter 1 is an introduction about the research background, the significance of the research, literature review, structural arrangements, research methods and innovations of the paper.

Chapter 2 systematically states the theory of the formation mechanism of carbon tariff. First of all, by research of the connotation of carbon tariff, we find that carbon tariff is a carbon activated border tax adjustment measure and it has the property of trade protectionism; then several different concept formulations on carbon tariff from academics, politicians in the EU and the U.S. are clarified from the implementation forms of carbon tariff, tax adjustment basis and so on, after that key factors of carbon tariff proposal is discussed in the light of the existing carbon tariff programs from the European Union and the United States. Secondly, the formation of carbon tariff and its impact on international trade is illustrated from the economic angle. Finally, the formation basis of carbon tariff is discussed from political, economic and technical aspects. Carbon tariff is not random, isolated, but has profound political, economic and technical basis. It is found that carbon political philosophy booming in Europe and the U.S. providing political foundation, and the economic, technical strength and competitive advantage related to the development of low-carbon economy, new energy economy in the U.S. and European countries acting as solid economic and technological basis to carbon tariff.

Chapter 3 comprehensively analyzes the legality of the proposed carbon tariffs from the dimensions of the international trade system, the international climate regime and other international environment law. Firstly, the carbon tariff is inspected according to following three aspects of the international trade system: GATT1994 provisions on border tax adjustment, the basic principles and the environment exception of GATT1994. Secondly, it is investigated on the basis of the international climate regime, mainly United Nations Framework of Climate Change Convention and its Kyoto Protocol. Thirdly, the compatibility is examined through other international environment law, such as Rio Declaration on Environment and Development. It is worthy to note that the multilateral trading system and the international climate regime are not static; they are evolving in accordance with the political orientation and the change of strength of the Parties with the times. To grasp the direction of the evolution of international laws, dynamic perspective and forward-looking vision are needed. China should cite favorable terms of existing international laws to safeguard its own interests; meanwhile, it should actively participate in the process of evolution of international law in the near future to compete for rule-making right and the right to speak.

Chapter 4 makes an in-depth analysis on the multi-agent, multi-level game around carbon tariff. First of all, the “Protection for Sale” model is introduced to analyze the game between special interest groups related to carbon tariff and the government with special political and economic objectives, from the micro level. Secondly, the similarities and divergences on carbon tariff within developed countries are analyzed, and the same research is done for developing countries. Then basing on the above analysis, the possibility for developed countries to form a carbon tariff imposing alliance and developing countries to reach a counter-carbon tariffs alliance is investigated, separately from the middle level. Finally, from the macro level, through analyzing the similarities and differences between two camps of developed and developing world in the north-south pattern, the prospects of implementation of carbon tariff and the intensity of the trade friction are predicted. There are no permanent friends, only permanent interests. The game involves with different goals and participants, resulting in different payoffs. So, in the dynamic game, China should adjust its strategy timely, through differentiating developed countries and integrating developing countries to form counter-carbon tariff union to postpone the implementation of carbon tariff so as to maintain China's foreign trade interests.

Chapter 5 evaluates the impact of carbon tariff on China's export trade in whole and by sector. Carbon tariff is a double-edged sword. On the one hand, adjustment and upgrade of economic structure, shift of economic development pattern, enhancement energy security, protection for resources and environment are of great urgency in China, and carbon tariff seems to play the role of the “reversing forcing mechanism” from the outside to force China to speed up the adjustment of economic structure and transformation of economic development mode, while achieving the goal of guaranteeing energy security and protecting the environment and resources. On the other hand, the higher carbon intensity of Chinese exports, high export dependence, high export market concentration in EU and the U.S. mean that carbon tariff will inevitably make a tremendous bad impact on China’s export trade and thus production, employment and welfare of related industries will suffer heavy losses. Simulation analysis based on the carbon price on existing EU carbon market and the carbon tariff schemes from European Union and the United States shows that carbon tariffs will produce negative impact on China's export trade, and carbon tariff calculated on the basis of life-circle emissions will do more harm to China’s export trade than calculated according to direct emissions, what’s more, joint implementation of the proposed carbon tariff scheme from EU and the U.S. will certainly has a larger adverse effect than separate implementation at the same level of carbon price.

Two cases are studied on the degree of impact of carbon tariff on certain sectors, one case is about Chinese export of seamless steel pipe used for oil and gas digging to the U.S. market, the other is about carbon tariff on aviation emissions levied by the EU. It is concluded that: (a) Chinese export of seamless steel pipe used for oil and gas digging to the U.S. market only has advantage in price index and market share index. Recent years, steel and other energy-intensive industries in China already suffered heavy losses from trade sanctions such as anti-dumping and countervailing made by developed countries, so if carbon tariff is made into effect, the damage to Chinese export would be disastrous; (b) It is estimated in accordance with current EU emissions trading system that if the EU eventually imposes carbon tariff on aviation emissions from Chinese flights, then its influence on China's rapidly growing air transportation industry will be enormous. Although, the EU is in a dominating position about imposition carbon tariff on international aviation industry, due to strategic nature of this issue, China and other countries are not entirely passive, by the use of the strategic measures (retaliatory trade measures, for example, to cancel aircraft orders from Airbus; or enter international alliance of counter- carbon tariff on aviation emissions including Russia, the United States and other countries), they could change their payoffs. Thus, in this game, China might maximize its benefit or minimize loss under the given conditions of the game.

Chapter 6 proposes concrete countermeasures basing on the above analysis.

Read the full article here:       碳关税对中国出口贸易的影响及对策研究.pdf