As a highly energy-intensive industry, the steel industry is the largest carbon emitter among the 31 categories of manufacturing, and the pressure of total carbon emission control is huge. At the same time, the steel industry is also in the first six categories of industries included in the scope of carbon border regulation mechanism (CBAM), the total export to Europe is larger. In this context, it is necessary to clarify the impact of CBAM on China's steel industry as soon as possible, study the coping strategies of the steel industry, turn the crisis into an opportunity, turn pressure into a driving force, and achieve green, low-carbon and high-quality development of the steel industry.

Eu CBAM and Transition policy

CBAM is an integral part and core of the European Green Deal, which aims to impose a special CO2 emission tariff on imported products with high carbon emissions, make up for the difference between the carbon price in the country of origin of imported products and the carbon price in the EU Emissions Trading System, avoid "carbon leakage", and improve the competitiveness of products in the region. Carbon leakage means that after a country (region) takes carbon emission reduction measures, due to the rising cost, some producers of products in the country (region) (especially carbon-intensive industries) transfer to other countries (regions) that have not taken carbon emission reduction measures.

CBAM sets a transitional period in time. According to the EU CBAM Act, which was finally adopted in May 2023, there will be a transition period from 1 October 2023 until the end of 2025. From January 1, 2026, carbon tariffs will be formally imposed on related products imported into the EU.

The impact of CBAM on China's steel industry

China is the world's largest steel producer, consumer and largest exporter, with crude steel production exceeding 1 billion tons for four consecutive years from 2020, and crude steel production accounting for 53.97% of global crude steel production in 2023. Of the six categories of steel, cement, aluminum, fertilizer, electricity and hydrogen affected by CBAM in China in 2023, steel accounted for 76% of the total value of the six categories of products exported to the EU. In the face of the continuous promotion of the EU's deep emission reduction policy and the gradual expansion of the coverage of CBAM, China's steel industry will face enormous pressure such as increased production costs and weakened international competitiveness. Crisis and opportunity always coexist, to overcome the crisis is an opportunity. CBAM transition policy can be described as an organic crisis for China's steel industry, and to a certain extent, it can force China's steel industry to accelerate the progress of green and low-carbon transformation.

1. Forced the steel industry process change to enhance international competitiveness.

After the implementation of CBAM, China's steel industry will further deepen its understanding of the importance of low-carbon development and carbon emission reduction, and comprehensively enhance the level of low-carbon development and international competitiveness of the industry. On the one hand, China's steel low-carbon innovation technology research and development and demonstration promotion and application will be accelerated. The R&D and application of innovative low-carbon technologies such as hydrogen-rich carbon cycle blast furnace, top gas cycle oxygen blast furnace, hydrogen-rich blast furnace smelting and CCUS will usher in new development opportunities; Cooperation among government, industry, universities and research institutes will be further strengthened, the development of new technologies, new industries and new business forms for energy conservation and carbon reduction will be accelerated, and the capacity for carbon management will be continuously improved. The market-oriented mechanism will spur the steel industry to carry out a comprehensive, wide range and deep low-carbon revolution, and help the steel industry achieve low-carbon transformation and green development. On the other hand, the development of short process of electric furnace steel is expected to accelerate. The carbon emission of EAF steel has obvious low carbon advantage compared with the traditional BF converter long process steel making. The implementation of CBAM will increase the carbon emission cost of long-process steel enterprises, and in order to reduce the comprehensive production cost of enterprises, the proportion of short-process steel making by electric furnace will be further increased.

2. Forced iron and steel enterprises to reduce costs and increase efficiency to enhance cost competitiveness.

From the point of view of China's steel exports to the EU, the proportion of high value-added varieties such as plate is high, such products are mainly produced by BF - converter long process, and may require more complex production processes, and the intensity of carbon emissions per ton of steel is high. According to domestic data, the carbon emissions per ton of steel using the short process of electric furnace is about 70% lower than the long process, the proportion of the EU steel industry using the short process of electric furnace is 40%, while China's long process steelmaking occupies the dominant position, and the short process of electric furnace steelmaking accounts for only 10%. As a result, China's carbon emissions per ton of steel are much higher than those of the EU. According to the current CBAM rules, the preliminary estimate will lead to an increase in the cost of tons of steel exported from China to the EU of 652 yuan to 690 yuan. The implementation of carbon tariffs will raise the production cost of Chinese steel enterprises, lead to the rise in the price of steel products exported, increase the competitive pressure of steel products exported, and significantly reduce the competitiveness of Chinese steel products in the international market.

3. Forced steel enterprises to green low-carbon transformation, enhance low-carbon competitiveness.

Enterprises are the main market players of low-carbon green transformation and the main undertakers of CBAM, and enhancing low-carbon competitiveness is an inevitable trend of future development. Cooperate with importers to complete carbon emission reporting during the transition period to avoid policy risks; Follow up CBAM rules research and consolidate basic capacity building; We will accelerate green and low-carbon transformation and comprehensively enhance our low-carbon competitiveness.

Coping strategies of Chinese steel industry under CBAM background

In the context of the European Union promoting the implementation of CBAM and the global response to the impact of climate change, the green and low-carbon development of China's steel industry has taken steps and achieved fruitful results.

Baowu pioneered the new process of hydrogen-rich carbon circulating oxygen blast furnace (HyCROF), achieved new breakthroughs in green and low-carbon metallurgical technology, and guided the development direction of low-carbon transformation of long process smelting blast furnaces in the world steel industry; Hesteel hosted the first World Hydrogen Metallurgy Technology Exchange Conference, to promote the hydrogen metallurgy technology in China and the world to achieve better and faster development, for the low-carbon green high-quality development of the world steel industry and promote the construction of a community of human destiny, to provide "China's low-carbon program", and make greater contributions; Baotou Steel vigorously promotes the construction of 2 million tons of CCUS (Phase I 500,000 tons) demonstration project, explores cutting-edge technologies in the steel industry, and comprehensively creates a new model of carbon reduction.

Establish a coordinated mechanism between carbon reduction measures and carbon tax that can be regulated

1. CBAM tax calculation.

After the phasing out of free credits in the carbon market, the carbon tariff essentially means that companies importing into the EU buy a CBAM certificate (a CBAM certificate is a certificate in electronic format corresponding to 1 tonne of greenhouse gas emissions) to pay the difference between the carbon price paid by the country of origin and the carbon quota price in the EU ETS. CBAM will require importers to declare the amount of goods imported into the EU each year, the carbon emissions of the goods and the carbon price paid by the country of origin, combined with the free allowances allocated by the EU carbon market, to calculate the carbon tariff to be paid.

The specific calculation method is: CBAM carbon tariff =CBAM certificate price × carbon emission = (ETS carbon trading system price - carbon price of the product in the country of origin) × (product carbon emission - free quota for similar products in the EU)

ETS Carbon Trading System price = the average price of the previous week's EU carbon trading platform closing price (for calendar weeks without auction trading, the price of carbon import permits is the average price of the week before auction trading). ETS is currently trading at around €90 / tonne.

The carbon price of the country of origin of the product can be reduced only if the country of origin has effectively paid the carbon price. At the same time, any tax rebates or other forms of compensation available in the country of origin will reduce the carbon price of the product in the country of origin.

It should be noted that the free quota for similar products in the EU is scheduled to decrease year by year (the plan is to eliminate all in 2034), so when the free quota of EU enterprises is less, the carbon tariff burden of imported products will increase sharply.

In terms of the carbon price gap between China and Europe, an important price signal worth paying attention to recently is that the EU carbon price has exceeded 100 euros/ton for the first time, rising rapidly in a short period of time.

2. The difference between domestic carbon market prices and EU carbon market prices.

At present, the carbon price in China's carbon market is 50 yuan/ton ~ 60 yuan/ton, and the carbon price in the EU exceeds 100 euros/ton, which is about 720 yuan/ton, showing a large gap between the two.

According to data, the average carbon price in the EU carbon market in 2022 is 81 euros/ton. However, since 2023, the EU carbon price has been steadily rising, especially after February, rising again and again to break the 100 euro/ton mark.

At present, China's carbon emissions still have not reached the peak, the domestic implementation of intensity control, total volume control as a supplement to the control policy, enterprise quota free access, and basically meet the production needs, carbon trading activity is low, carbon price is low, the current average transaction price of about 56 yuan/ton, compared with the EU current price of about 85 euros/ton is still a big gap.

In the future, with the improvement of China's carbon market pricing mechanism, the domestic carbon market price is expected to gradually increase. It is estimated that the carbon price of China's carbon market may be around $8 to $10 per ton during the "14th Five-Year Plan" period, and the carbon price may further rise to $15 per ton during the "15th Five-Year Plan" period. In the short period of the performance period, the demand of enterprises will rise, driving the average price of the transaction to rise in stages.

3. The carbon emission reduction "benefit" of CBAM - a new technology of hydrocarbon-coupled iron making.

It is necessary to solve the problem of hydrogen source for hydrogen rich blast furnace injection. If there is surplus coke oven gas or coal bed gas can be used for blast furnace injection. In addition to some iron and steel enterprises, many iron and steel enterprises purchase coke to organize production, and lack high calorific value coke oven gas. For iron and steel enterprises without coking process, it is suggested to use "supercritical water coal steaming" technology to produce hydrogen. This technology makes use of the special physical and chemical properties of supercritical water to convert carbon, hydrogen and oxygen elements in coal into hydrogen and carbon dioxide, and make them enriched and utilized as resources. The nitrogen, sulfur and metal elements, various inorganic minerals and ash contained in the coal during gasification are discharged from the bottom of the reactor in the form of ash. This technology can realize the direct conversion of chemical energy from coal to hydrogen energy, and can inhibit the emission of harmful substances such as NOX, SO2 and PM2.5 from the source, without desulfurization, dust removal and other processes, greatly shortening the hydrogen production process and reducing the cost of hydrogen production. At the same time, the generated high-purity CO2 can also be recycled.

The new technology of HC-coupled iron making, which combines hydrogen rich carbon cycle and blast furnace hydrogen rich injection, is a carbon reduction "benefit" and energy efficiency "god" which is suitable for carbon tax.

4. Establish a linkage mechanism between carbon emission reduction and carbon tax.

In the case that the original blast furnace process system does not change greatly, the emission reduction cost of enterprises is mainly reflected in the change of gas intake. By imposing a reasonable carbon tax, we can stimulate enterprises to change the original process to reach a new profit maximization point, and the corresponding emission reduction will be achieved at the new maximization point. Therefore, by bringing the carbon tax policy into the context of a specific blast furnace cycle coupling hydrogen rich technology, we establish a nonlinear correlation mechanism of emission reduction amount - blast furnace hydrogen rich technology reform - carbon tax, build a new "carbon reduction tool", and force enterprises to carry out innovation in emission reduction technology. Based on the principal-agent model, we get the carbon tax regulation mechanism, and the relationship between the carbon reduction ratio and the carbon tax rate can be obtained: M/N-1=P/C.

(1) Determination of tax scope P (adjustable) :

Experts from the Ministry of Finance said that the form of carbon tax rate is closely related to the tax basis, because carbon dioxide emissions are used as the tax basis, and the damage to the ecology of carbon dioxide emissions is directly related to its quantity, and has nothing to do with its value. Therefore, it is necessary to adopt the way of levying taxes from quantity, that is, to adopt the form of fixed tax rate. It is understood that every 1 ton of raw coal consumption produces about 1.9 tons of carbon dioxide. To this end, the relevant task force of the Ministry of Finance has recommended that China's carbon tax should eventually be levied based on the consumption of coal, natural gas and refined oil products. At the beginning of the carbon tax, the tax will be 10 yuan per ton of carbon dioxide emissions, and the collection period can be set in 2012. By 2020, the tax rate of the carbon tax can be raised to 40 yuan/ton, and the tax rate of the carbon tax can be raised to 80 yuan/ton in 2025.

(2) Determination of carbon emission reduction cost C:

Hydrogen-rich carbon cycle blast furnace, low-carbon blast furnace demonstration project and blast furnace hydrogen-rich metallurgy can enable domestic long process enterprises to reduce emissions to the EU carbon emission level, but there is a huge investment in transformation, the cost of hydrogen-rich carbon cycle + converter than the traditional blast furnace - converter long process increased by more than 10%, in other regions of the enterprise is expected to increase the cost of 250 yuan/ton to 300 yuan/ton and other problems. Therefore, it is proposed that blast furnace top gas cycle oxygen blast furnace can adapt to carbon tax, reduce the cost by reducing the cycle ratio, so that other small-scale enterprises can have the corresponding improvement conditions. It is preliminarily believed that there is a linear relationship between the cycle amount and the cost, and then the linear fitting function between the cost and the carbon reduction amount is obtained.

(3) The relationship between the amount of carbon reduction and the ratio of gas circulation on the top of the blast furnace:

The amount of carbon reduction is N-m, and M is the carbon emission with the maximum profit, M/N=1- the coke reduction ratio/the original coke ratio (carbon dioxide emissions are directly proportional to the heat of the coke ratio, and the ratio can be directly used).

(4) The relationship between the amount of carbon reduction and the ratio of gas circulation on the furnace top:

At present, it is known that Baosteel 100% cycle can reduce the fuel ratio of 150kg/t, and 20% cycle ratio fuel ratio can reduce about 20kg/t. According to practical experience, it is preliminarily considered that the condition of convexity is satisfied. The linear correlation between the cycle amount and the carbon reduction amount is obtained and verified by numerical simulation of the program.

The implementation of CBAM will form a potential green barrier to China and bring inevitable impact and influence to China's steel industry, but it also brings major strategic opportunities. Chinese steel enterprises should make arrangements as soon as possible, carry out low-carbon process and process reform, and recommend the use of controllable carbon emission reduction "profit" device and energy efficiency "god" device - hydrocarbon coupling iron making new technology. It can provide effective carbon emission reduction means for the steel industry, reduce carbon emission intensity, build a linkage mechanism between carbon emission reduction and carbon tax or CBMA, promote the green low-carbon transformation of enterprises, and promote the low-carbon green transformation of the global steel industry.以上翻译结果来自有道神经网络翻译（YNMT）· 通用场景