CBAM and China: EUR 18B in Annual Export Exposure
China faces the largest absolute CBAM exposure of any country — an estimated EUR 18 billion annually across steel, aluminium, and cement. The Chinese national ETS provides a partial offset for some manufacturers. This guide explains how the Chinese ETS deduction works and what Chinese exporters must do.
China CBAM Exposure by Sector
| Sector | Key companies | EU export volume | Estimated annual CBAM liability at default |
|---|---|---|---|
| Steel (BF-BOF dominant) | Baowu, HBIS, Ansteel, Shougang | 500,000–1,500,000 t/year | EUR 71–214M |
| Aluminium (primary — coal) | Chalco, Hongqiao, Xinfa | 200,000–500,000 t/year | EUR 162–406M |
| Cement | CNBM, Anhui Conch, CR Cement | 100,000–300,000 t/year | EUR 5–23M |
Chinese ETS Deduction: How It Works
The China ETS (launched 2021, expanded to steel, aluminium, cement in 2024) covers the sectors most exposed to CBAM. Chinese manufacturers paying China ETS compliance costs may be eligible for a CBAM deduction under Article 9 of Regulation 2023/956. The deduction is approximately EUR 10/tCO2 on verified actual emissions — reducing the net CBAM cost from EUR 65.42/tCO2 to EUR 55.42/tCO2.
The deduction requires: (1) verified documentation of China ETS compliance costs, (2) verified actual embedded carbon values, and (3) coordination between the Chinese manufacturer, their EU importer, and a CBAM verifier. This is complex — but for large exporters, the EUR 10/tCO2 deduction on millions of tonnes is significant.
Chinese Primary Aluminium: When to Use Default Values
Chinese primary aluminium producers using coal-heavy grids (grid factor 0.58–0.80 tCO2/MWh) typically achieve actual embedded carbon of 14–18 tCO2/t — above the 12.40 default. For these producers, using the default value is advantageous. However, producers in hydro-rich regions (Yunnan, Sichuan) with actual emissions of 4–6 tCO2/t benefit significantly from documenting actual values.
Sector-specific deep dives for China
China's CBAM Exposure at a Glance
China faces the largest total CBAM exposure of any non-EU exporting nation. Estimated annual CBAM-covered exports to the EU span steel, aluminium, and fertilisers, with a combined financial exposure of approximately €2–3 billion per year at current ETS prices. China's position as the world's largest producer of primary aluminium and the second-largest steel exporter to Europe makes CBAM a strategic priority for Chinese industry.
Sector-by-Sector Breakdown
Steel: China's steel sector is dominated by blast furnace–basic oxygen furnace (BF-BOF) production, which generates embedded carbon of approximately 1.8–2.2 tCO₂/t. Major EU-exporting entities include Baowu Group (the world's largest steelmaker), Shougang Group, and HBIS Group. At the EU default value of 2.18 tCO₂/t, Chinese BF-BOF producers have limited savings potential from actual-value documentation. However, EAF producers (a growing share of Chinese capacity) can achieve 0.5–0.9 tCO₂/t, making verification highly valuable.
Aluminium: China produces over 50% of global primary aluminium. The embedded carbon intensity varies dramatically by grid: coal-heavy provinces (Xinjiang, Inner Mongolia) produce 16–22 tCO₂/t, while hydro-rich provinces (Yunnan, Sichuan) produce 4–8 tCO₂/t. Major producers include Hongqiao Group, Chalco (Aluminum Corporation of China), and Yunnan Aluminium. The EU default value of 12.40 tCO₂/t means hydro-province producers have enormous savings potential from actual-value documentation. See China aluminium CBAM deep dive →
Fertilisers: China is the world's largest urea producer. Coal-gasification ammonia routes (dominant in China) produce approximately 3.0 tCO₂/t NH₃ — significantly above the EU default for gas-SMR routes. Chinese fertiliser exporters face above-default CBAM costs and should focus on N₂O abatement rather than actual-value documentation. See China steel CBAM deep dive →
Domestic Carbon Pricing Context
China launched its national Emissions Trading System (China ETS) in 2021, initially covering only the power sector. The China ETS is expanding to cover steel, aluminium, cement, and other heavy industries in subsequent phases. Under Article 9 of CBAM Regulation 2023/956, carbon prices paid in the country of origin can be deducted from CBAM certificate obligations — but only if the carbon price is directly linked to the production of the specific goods and is not subject to export rebates.
The China ETS is still developing its scope and price signal. Chinese manufacturers should monitor whether their sector's inclusion in the China ETS qualifies for Article 9 deductions, as this could materially reduce CBAM costs.
How Chinese Producers Should Prepare
Chinese manufacturers exporting to the EU should begin by engaging an ISO 14065 accredited verification body — CNAS-accredited bodies in China are recognised for CBAM verification purposes. The most impactful step for aluminium producers in hydro-rich provinces is to document actual grid emission factors and production routes, which can reduce CBAM certificate costs by 50–80% compared to default values. For steel producers, the priority is distinguishing EAF from BF-BOF production and documenting the grid emission factor for electricity-intensive EAF operations.
Find accredited verifiers: China CBAM Verifier Directory →
Frequently Asked Questions
What is China's total annual CBAM exposure?
China's annual CBAM exposure is estimated at EUR 18B+ across steel, aluminium, and cement — the largest of any country.
Does China's ETS offset CBAM costs?
Partially. China's ETS price (approximately EUR 10/tCO2) may qualify for CBAM deduction under Article 9 — but only with verified documentation of ETS compliance costs.
Should Chinese primary aluminium producers use default or actual values?
Producers in coal-heavy regions (actual 14–18 tCO2/t) should use the 12.40 default. Producers in hydro-rich regions (actual 4–6 tCO2/t) benefit significantly from documenting actual values.
What is China's grid emission factor for CBAM?
China's national average grid emission factor is approximately 0.58 tCO2/MWh. Regional factors vary: coal-heavy northern provinces are higher; hydro-rich Yunnan and Sichuan are lower.
Where can Chinese manufacturers find ISO 14065 accredited CBAM verifiers?
See the China verifier directory at /verification-directory/china/ for CNAS ISO 14065 accredited CBAM verification firms.
Calculate your CBAM saving → · Find a verifier → · What is embedded carbon? →