On January 1, the European Union (EU) began formally levying substantive charges under its Carbon Border Adjustment Mechanism (CBAM). According to China's Ministry of Commerce, the EU's move constitutes unfair and discriminatory treatment against China, is suspected of violating World Trade Organization regulations and the spirit of international climate agreements, and has also triggered China's serious concern and firm opposition.

In essence, CBAM functions as a "green tariff." Its rationale is that EU companies bear higher costs due to emissions-reduction requirements and should therefore impose a "carbon price differential" on imports. To fully understand it, however, it is necessary to revisit the EU's climate policy trajectory over the past two decades. Since 2005, the EU has relied on its Emissions Trading System (ETS) as the cornerstone of its climate strategy and a key market-based tool for cutting greenhouse gas emissions. However, as carbon prices soared to 70-100 EUR per tonne, the competitiveness of Europe's manufacturing sector gradually declined. CBAM consequently emerged as a remedial measure to address the unintended consequences of the EU's own policy design. Under this mechanism, exporters unable to provide EU-recognized "actual carbon emissions" are taxed based on EU-set default values for carbon intensity.

Evidence increasingly indicates that these default values are being deliberately inflated, amounting to potential covert trade discrimination. According to industry portal Eurometal, just before CBAM enters its charging phase in 2026, the European Commission abruptly revised emissions benchmarks for several products. Take steel billets — a major Chinese export — as an example. Earlier draft regulations set the default value at 1.75 tonnes of carbon dioxide per tonne of steel, in line with China's industry average of about 1.8 tonnes in 2024. At that stage, the methodology remained grounded in actual industrial values.

Yet in the final regulations issued in December 2025, the default value for Chinese steel billets surged to an astonishing 3.167 tonnes — an increase of 81 percent. Under this revised benchmark, Chinese exporters would be compelled to absorb an additional carbon cost of approximately 144 EUR (around 168 USD) per tonne. This figure is nearly double China's industry average and even exceeds the emissions levels of Europe's own aging blast furnaces, generally estimated at 1.8 to two tonnes. Market analysts warn that such a sudden and drastic cost hike poses considerable  challenges  in international trade.

Of even greater concern, the regulation has already come into effect, and charges have commenced. However, detailed operational guidelines and reporting regulations will not be released until sometime in 2026. As a result, many companies who are unable to complete complex certification processes within the short timeframe, are effectively forced to accept EU-mandated default values.

A leaked internal document revealed by U.S. media outlet Politico, sheds light on the reason behind this abrupt escalation. According to the document, EU technical teams carrying out on-site measurements, found that emissions from China's advanced production lines were in some cases even lower than those of European facilities.

Confronted with this scientific reality, the European Commission, under pressure from vested interests, opted not to reflect on its own lagging industrial upgrades.

Instead, to erect barriers before CBAM regulations took effect on January 1, it inflated emissions values for Chinese products by altering calculation methodologies.

This kind of "black-box accounting" is now drawing scrutiny worldwide. The Bipartisan Policy Center, a U.S. based think tank, has questioned the artificially inflated results presented by the EU's Joint Research Centre, including default emissions values applied to U.S. steel.

Last month, Abhyuday Jindal, managing director of Jindal Stainless, also publicly criticized the lack of clarity in the regulations. This opacity grants the EU excessive discretionary power.

At its core, the EU's decision to erect high barriers serves to shield its own members that underperform in emissions reduction. According to European Steel in Figures 2025, published by the European Steel Association, around 60 percent of Europe's steel output still relies on traditional blast-furnace processes. On a genuinely transparent and level playing field, Europe's outdated, high-emission production lines would lose competitiveness. Instead, the EU exploits the technical hurdles faced by developing countries in building sophisticated carbon-tracking systems, inflating external default values to artificially prolong the life of inefficient domestic capacity. This practice — lenient toward itself, harsh toward others, reveals the EU's ambition to dominate the standard-setting process.

Cumbersome reporting requirements and opaque calculations are now distorting global trade. In response, China is accelerating efforts to establish its own carbon-footprint framework to safeguard "data sovereignty." Climate policy should not be weaponized to preserve industrial hegemony. If the EU persists in transforming CBAM into a global "cash machine," it will ultimately encounter collective resistance from its trading partners. What the world needs is fair, fact-based cooperation, not a biased and credibility-deficient technical barrier.