The study looked at the likely impact of the CBAM on Chinese exports to the EU across a range of different industries. Let’s first look at the estimated impact in 2026, the year CBAM payments come into effect. The graph below shows that the study authors estimate that the CBAM will reduce China’s GDP by 0.01% and CO2 emissions by about 0.3%. In other words: nothing.
That is a good thing because it shows that the CBAM will not disrupt trade or business if implemented.
Estimated impact of CBAM on China in 2026
Source: Yue et al. (2025)
But individual industries are more affected by the CBAM than others. Cement, steel and chemicals are the prominent examples of Chinese exports that will become much more expensive in the EU thanks to the CBAM.
In the first year there is an import quota that is exempt from the CBAM. This quota will decrease every year, while the range of products and emissions subject to CBAM payments will increase. The result is that Chinese exports of cement and other building materials could fall by a third by 2034 if China does not decarbonize its cement industry. Similarly, chemical exports could fall by 7-8%.
Estimated impact of CBAM on Chinese industry until 2034
Source: Yue et al. (2025)
This is a significant risk for Chinese companies and a clear incentive for these companies to modernize and decarbonize their production processes or find other markets to buy their goods from them.
But diverting these goods to other regions will only lower prices there and provide an additional incentive to decarbonize their production so they can ship it to the lucrative European market.
This is how the EU shapes the global economy with its regulations. People around the world are moaning and groaning about the data protection and privacy regulations that come with GDPR, which has a global reach. Yet we are all better off for it because our data cannot be used for exploitative purposes (to learn more about some of the most egregious examples, read the book ‘Enshittification’ by Cory Doctorow).
Likewise, by regulating CO2 emissions globally through its CBAM, the EU is accelerating decarbonization from which we will all benefit. Libertarians and free market advocates don’t like it. Yet anyone who has ever studied market failure knows that this kind of market intervention is important and benefits everyone: people and companies.
And in the case of Chinese exporters, I’m not worried about retaliation from the Chinese government or anything like that. China is well on its way to decarbonizing its economy, and it will easily meet CBAM requirements in the future because the Chinese government, unlike other countries, has understood that decarbonizing the economy leads to more productive and, in the long term, profitable businesses.
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