China and the European Union recently concluded their sixth High-Level Dialogue on Environment and Climate, discussing topics such as the carbon market and the Carbon Border Adjustment Mechanism (CBAM). A central issue is whether the EU might include China as a source of international carbon credits under the proposed 3% allowance for its 2040 climate targets and the proposed 90% emissions cut. While the EU depends on China for critical minerals essential to the energy transition, it's unlikely to purchase carbon credits from the same six sectors covered by CBAM—steel, cement, aluminium, hydrogen, electricity, and fertiliser—due to competitiveness concerns. Therefore, Dr Rossetto suggests that any demand will likely exclude sectors directly covered by CBAM.

The second major question is whether China would agree to export carbon credits to the EU, considering its own climate goals and concerns about CBAM. Although China might eventually participate, it has alternative markets with more immediate and higher demand, particularly the CORSIA program under ICAO, which may require up to one billion tons of credits by mid 2030—surpassing projected EU demand. Both parties are also preparing to submit revised Nationally Determined Contributions (NDCs) ahead of COP30 in Belém, Brazil. These developments carry substantial market implications and further updates are expected as negotiations unfold.

Key words:
#china #europeanunion #carbonmarket #cbam #criticalminerals #steel #cement #aluminium #hydrogen #electricity #fertiliser #corsia #icao #ndc #cop30 #Belém

15 July 2025 - Readout from the 6th EU-China High-Level Dialogue on Environment and Climate:
climate.ec.europa.eu/news-other-reads/news/readout…