With the EU's Carbon Border Adjustment Mechanism (CBAM) set to begin its pilot phase in October 2023, and the US's Clean Competition Act (CCA) scheduled to take effect in 2024, the US CCA differs from the US in that it has no pilot phase. Facing the looming carbon tariffs of various countries, the only way to seize the initiative in this carbon tariff trade is to continuously monitor policy trends, understand the rules of the game, and implement carbon inventory and reduction measures. Below, we will introduce you to the US CCA bill.
On June 7, 2022, the U.S. Senate introduced the Clean Competition Act, which aims to reduce climate pollution, strengthen the competitiveness of the U.S. manufacturing industry, and implement carbon border adjustments for energy-intensive imported products. The bill has now completed its second reading. If passed, carbon tariffs will be imposed on domestic manufacturers and importers in the United States starting in 2024. The industries subject to tariffs include oil extraction, natural gas extraction, underground coal mining, pulp mills, paper mills, newsprint mills, cardboard mills, refineries, ethanol, organic chemicals, fertilizers, glass, cement, lime, steel, aluminum, hydrogen, adipic acid and other 25 industries.
On June 7, 2022, the U.S. Senate introduced the Clean Competition Act, which aims to reduce climate pollution, strengthen the competitiveness of the U.S. manufacturing industry, and implement carbon border adjustments for energy-intensive imported products. The bill has now completed its second reading. If passed, carbon tariffs will be imposed on domestic manufacturers and importers in the United States starting in 2024. The industries subject to tariffs include oil extraction, natural gas extraction, underground coal mining, pulp mills, paper mills, newsprint mills, cardboard mills, refineries, ethanol, organic chemicals, fertilizers, glass, cement, lime, steel, aluminum, hydrogen, adipic acid and other 25 industries.
The United States is Taiwan's second-largest export destination, with exports valued at approximately US$75.1 billion in 2022, a 14% year-on-year increase. According to data from the International Trade Center (ITC), among the items subject to US import controls in 2022, steel products were the fifth-largest category for Taiwan, accounting for 3.7% of US imports. The top four countries were Canada (21.9%), Mexico (12.5%), Brazil (9.6%), and South Korea (6.1%). The "competition" bill, as evidenced by its primary objective of penalizing manufacturers in carbon-intensive industries and enhancing the competitiveness of US companies with relatively low carbon emissions, is intended to penalize manufacturers in carbon-intensive industries. Seventy percent of US steel production is done by melting scrap in electric arc furnaces. The US steel industry also claims to have the lowest carbon emissions globally, giving it an advantage against the EU's CBAM and CCA regulations.
Faced with the United States' aggressive competition bill, the only way to avoid being defeated in this trade war is to conduct carbon footprint audits, understand the carbon emissions of affected industries, and quickly implement carbon reduction measures in the production process. Although the bill has not yet been formally passed in the third reading and the collection time may be delayed, taxing carbon-intensive industries is inevitable, and the scope of collection will expand, and the carbon price will increase annually. Energy conservation and carbon reduction are indispensable steps for companies to enhance their competitiveness and sustainable development. In particular, the United States is Taiwan's major export market, and Taiwanese manufacturers should prepare as soon as possible.
To help small and medium-sized enterprises address carbon anxiety, the Taiwanese government provides policies such as carbon reduction and technical training to encourage active participation. The recently launched "Ministry of Economic Affairs' Small, Medium and Startup Administration_Carbon Service" LINE@ provides businesses and the public with relevant knowledge about "carbon", course information, carbon emission estimation tools, carbon reduction diagnosis and subsidies, etc. By integrating these services into mobile phones, the public and businesses can strengthen their understanding of carbon, reduce the gap in information access, and make carbon reduction a part of life.
Finally, small and medium-sized enterprises should view the trade policies introduced by European and American countries as an opportunity. By taking the lead in manufacturing low-carbon equipment, strengthening technological innovation, and promoting green transformation and sustainable development, they can help their companies grow rapidly while enhancing the competitiveness of industrial exports, which will be beneficial to the future development of their companies.
By Cao Yuru, Specialist, Quality, Environment, and Safety Department, Policy Research Group, Plastics Industry Technology Development Center
