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How global trade could fragment after the EU’s tax on ‘dirty’ imports

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By illuminem briefings

· 2 min read

illuminem summarizes for you the essential news of the day. Read the full piece on the Financial Times or enjoy below:

🗞️ Driving the news: In Jiaxing, near Shanghai, 400 steel industry professionals convened to address China's challenge in transitioning from coal-fired steel production to cleaner methods 
This shift is critical as the EU's carbon tax on imports like steel, set to begin in 2026, pressures China, the world's largest steel producer, to decarbonize or risk losing its global dominance

🔭 The context: The EU's Carbon Border Adjustment Mechanism (CBAM) aims to level the playing field for European companies and advance broader carbon pricing in line with the Paris agreement goals 
This policy, however, raises concerns of trade fragmentation and green protectionism, particularly in China, which views it as a threat to its manufacturing and export dominance

🌍 Why it matters for the planet: The transition to cleaner steel production is vital in reducing global carbon emissions as steel is a major contributor to industrial carbon emissions, and the EU's actions signal a significant step towards global decarbonization efforts
However, this move also risks creating a two-tier system where cleaner products are exported to strict markets like the EU, while coal-powered products go to less stringent countries

⏭️ What's next: The implementation of CBAM will be closely monitored by other countries, potentially leading to similar measures worldwide
This scenario could accelerate the division between Western economies and China, prompting possible retaliatory measures

💬 One quote: "The EU lawyers who made CBAM are 100 per cent convinced that it is WTO compliant because we are applying the same levies to domestic producers as outside producers," (an EU official)

📈 One stat: Steel accounts for 22% of the EU’s industrial carbon emissions, making it the largest sector affected by CBAM

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