China has claimed the European Union is breaching global trade rules with its proposal to impose a carbon border tax that would increase prices of non-EU products sold in the bloc to account for their carbon footprint.

"Carbon border tax is essentially a kind of unilateral measure,” said Liu Youbin, a spokesman for China’s Ministry of Ecology & Environment, at a media briefing on Monday.

“The unprincipled extension of climate issues to trade not only violates WTO (World Trade Organization) rules, it is [also] a blow to the free and open multilateral trading system and may cause serious damage to international trust and economic growth. It is also inconsistent with the principles and requirements of the United Nations Framework Convention on Climate Change and its Paris Agreement," said Liu.

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The EU earlier this month unveiled a plan — dubbed Fit for 55 — to levy the world’s first carbon border tax that is intended to achieve a 55% reduction in greenhouse gas emissions in 2030.

The tax, formally called Carbon Border Adjustment Mechanism (CBAM) will be phased in from 2026 on the imports of carbon-intensive products such as steel, fertilisers and cement.

Prior to that, between 2023 and 2025, such importers into the EU would be required to monitor and report emissions footprints.

“It’s a matter of survival” for EU industry, Frans Timmermans, the Commission’s climate policy chief, said earlier. Timmermans highlighted the risk of “carbon leakage” if companies were to leave Europe to avoid the cost of its emissions-cutting policies.

However, China’s stance is that the CBAM is effectively an import tariff, which would impact developing nations’ efforts in tackling climate change.

"China always believes that multilateralism is the only way to solve global issues. Facing the challenge of climate change, all countries are actually a community with a shared future,” added Liu.

“All parties should adhere to multilateralism, the principles of common but differentiated responsibilities and respective capabilities and the nationally determined contributions. And the countries should take action on climate that suit their national conditions through broader global cooperation and jointly tackle climate change.”

Industrial inputs

As the world's top manufacturer of industrial raw materials such as steel and cement, China could be the worst hit by the CBAM, researchers at Tsinghua University’s Centre for Industrial Development & Environmental Governance said in a recent paper, reported Reuters.

However, the researchers added there was no evidence that the impact would be of long-term detriment to China's development.

China in mid-July started its own national emissions-trading scheme with prices since its inception averaging less than €7 per tonne (US$8.27) while prices in the EU carbon market are typically north of €50 per tonne.

Beijing in January cautioned about the EU’s proposed carbon tax, with a senior Chinese diplomat telling a Euractiv event that “more consultation” was needed before any such mechanism was implemented.