Today is May 26, 2026, nearly six months since the EU Carbon Border Adjustment Mechanism (CBAM) officially entered its certificate purchase phase. Just two weeks ago (May 13), the European Commission released a key draft regulation that will determine trade costs for the next decade, and, for the first time, included China's national carbon market (CETS) in the discussion of "potentially eligible systems." Is this an opportunity or a challenge? Let's break it down.

The core objective of this draft regulation is to avoid double taxation, and three key points deserve particular attention. First, CBAM certificate prices will closely follow the EU Emissions Trading System (EU ETS) average price, with the initial price set at €75.36 per tonne of CO₂e – meaning that for every tonne of carbon emissions from exported products, at least this cost must be borne. Second, the draft and related discussion documents have, for the first time, included China's national carbon market (CETS) in the scope of a "potentially eligible system," acknowledging that it could become a qualified source for carbon price deductions in the future. Although this is still in the public consultation phase (comments due by June 10), the signal is significant – the EU is seriously evaluating China's carbon pricing mechanism. Third, clear caps have been set for deductions: importers may deduct overseas carbon prices corresponding to a 5% deviation in emissions, and the use of international carbon credits (e.g., from VERRA) is capped at 10%; the remaining portion must be paid for with real money to purchase CBAM certificates.

In terms of scope expansion, the EU plans to extend CBAM coverage from 2028 to approximately 180 downstream steel- and aluminum-intensive products, including machinery, auto parts, and washing machines. By then, not only primary materials but even screws and engine casings could be subject to the levy.

The impact of CBAM has moved from paper to real financial losses. Chinese industry circles widely believe that the default values constitute an "invisible barrier." Taking the steel industry as an example, the EU's default carbon emission value for Chinese steel billet is 3.169 tonnes CO₂/tonne of steel, while China's actual industry average is only 1.57 tonnes – a deviation of 102%. Using the default value would effectively double the carbon cost. China Metallurgical News has directly called it an unreasonable trade barrier. The aluminum industry faces similar pressure: China exports about €3 billion worth of aluminum products to the EU each year. The EU's default emission value for Chinese electrolytic aluminum is 3.3 tonnes CO₂/tonne of aluminum – more than double China's actual value of 1.57 tonnes. Based on a domestic carbon price of RMB 240/tonne, the carbon cost per tonne could exceed RMB 600, reducing corporate profits by more than 10%. The way out lies in increasing the share of green electricity, but China's current 27.7% green power consumption ratio for aluminum is still far below the international advanced level of 40-50%. Meanwhile, CBAM's levy on the electricity sector has directly hit EU neighbors hard – in the first quarter of 2026, Ukraine's electricity exports plunged 6.4 times year-on-year, losing about $26 million in revenue, and Kyiv is urgently seeking exemption negotiations. In the Western Balkans, companies investing in wind and solar projects are jointly lobbying the EU to grant CBAM exemptions for renewable electricity exported to the EU. The UK has also quickly followed suit, officially launching its own version of a carbon border adjustment mechanism (UK CBAM), set to take effect on January 1, 2027, to prevent EU goods from unfairly flooding the British market due to carbon cost differences.

For Chinese enterprises, CBAM brings three major direct impacts. First, costs go from zero to positive, putting sudden pressure on cash flow. During the transition period (2023-2025), only data reporting was required without payment. But from 2026 onward, every batch of export products requires the advance purchase of CBAM certificates. For a company exporting 100,000 tonnes of steel annually, based on the default value of 3.169 tonnes/tonne of steel, the certificate purchase alone would require an annual capital commitment of 100,000 × 3.169 × €75.36 ≈ €23.87 million. Second, high default values amount to a disguised penalty: if actual emissions data is not provided, the EU's "worst-case scenario" default value applies. For Chinese steel and aluminum, the default values are more than 100% higher than actual values, meaning companies that proactively measure and certify their actual emissions data can immediately cut their carbon costs in half. Third, free allowances are gradually being phased out – the EU's free industrial carbon allowances are being reduced year by year, with an accelerated decline starting in 2026. In the future, CBAM certificate prices will more closely track market prices, and carbon costs will rise linearly with no buffer.

The window of opportunity has closed. This is no longer a "preparation phase" but the "first year of compliance." Companies must take three actions now. First, immediately establish a mechanism for purchasing CBAM certificates and financial budgeting. Don't wait until the 2027 surrender deadline. From now on, incorporate CBAM certificate costs into every export contract quotation and purchase the corresponding number of certificates at the time of export. Second, abandon default values and start calculating actual emissions data: hire a third-party organization to verify the actual carbon emissions of products according to EU methodology (monitoring plan, emission factors, activity data). For steel, reducing the value from 3.169 to 1.57 cuts the carbon cost in half, saving millions of euros per year. Third, map out a path to emission reduction to lower long-term carbon costs, including increasing the share of green electricity and green hydrogen, investing in energy efficiency improvements and carbon capture technologies, and integrating early into China's carbon market (CETS) to obtain compliant domestic carbon price vouchers – which will be a key credential for applying for deductions from the EU in the future. CBAM is not a choice of "whether to respond," but a survival battle over "how to respond." Those who act first will take the initiative.