Quantifying the long-term impact of carbon border adjustment mechanism on Chinese steel industry

Mitigating climate change has become a global consensus, yet uneven carbon prices and fragmented policies raise concerns about carbon leakage and trade competitiveness. The European Union's carbon border adjustment mechanism (CBAM) levies charges on imported goods based on embedded emissions. This study develops a process-level accounting framework to assess the long-term impacts of CBAM on China's steel industry. Linking production routes, emission intensities, and carbon pricing, we estimate certificate costs of 0.29-12.3 billion CNY by 2050 across scenarios. Sensitivity analysis identifies the EU emissions trading system price as the primary driver, while low-carbon technologies such as direct reduced iron (DRI) and electric arc furnace (EAF) routes significantly reduce the burden. Inclusion of steel in China's national carbon market could offset up to 11.44% of blast furnace-basic oxygen furnace (BF-BOF) and 18.78% of DRI-EAF costs. The findings highlight the importance of internationally comparable carbon accounting and reinvesting CBAM revenues into green innovation in developing economies.