The Impact of Carbon Border Adjustment Mechanisms and China's Response Strategies

Abstract

The Carbon Border Adjustment Mechanism (CBAM) is a core tool of the European Union in advancing climate governance. However, CBAM fundamentally conflicts with the principle of "common but differentiated responsibilities (CBDR-RC)" and the national treatment principle of the World Trade Organization (WTO) in its institutional design, quoting the exception clause of Article 20 of General Agreement on Tariffs and Trade (GATT) also faces strict tests of "necessity" and "proportionality". For China, the short-term trade impact of CBAM is limited, but in the medium to long term, it will exacerbate export costs and pressure for industrial transformation; at the industrial level, it may not only force green innovation in high carbon industries, but also trigger the reverse effect of small and medium-sized enterprises exiting and carbon leakage. Therefore, China should respond systematically from three levels: multilateral, bilateral, and domestic. Collaborating with developing countries at the border level to strive for fair rules and promote the institutionalization of CBDR-RC principles; strive for carbon price deduction, mutual recognition of accounting standards, and equivalent exemptions at the bilateral level; improve the carbon pricing system at the domestic level and accelerate the green transformation of industries. The strategic framework of internal and external collaboration helps China safeguard its development rights and interests in the climate trade game.