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This article collects and analyzes the promotion and practice of the Clean Competition Act (CCA) in the United States. It mainly investigates and collects information about the U.S. regulations on the Act and its impact on Taiwanese companies, and provides suggestions on how companies can respond. Secondly, this article also summarizes the comparison between the European Union (Carbon Border Adjustment Mechanism, CBAM) and the US CCA to help small and medium-sized enterprises respond to the carbon tariff policies released by Europe and the United States as soon as possible.
1. Overview of the bill:
In June 2022, the U.S. Senate proposed the Clean Competition Act to implement carbon border adjustments on energy-intensive imported products. It is expected to impose carbon tariffs on U.S.-made products and U.S. importers starting in 2024, including oil refining, petrochemicals, and fertilizers. , cement, steel and aluminum.
What is different from the EU CBAM is the baseline for carbon tariff calculation and the objects to be levied. The US CCA Act charges carbon fees for importers and domestic manufacturers, but domestic manufacturers can obtain tax rebates when exporting to other countries; the calculation method is based on the US Department of the Treasury. The reported information is used to calculate the average carbon content of each category of U.S. products as the baseline for levying carbon taxes. If the manufacturer's carbon intensity exceeds the carbon intensity baseline applicable to the U.S. industry, it must pay carbon tax on the excess. .
In addition, the baseline will be adjusted downward by 2.5% every year starting from 2025, and by 5% every year after 2029. It is worth noting that if taxable products exported to the United States use other taxable products as raw materials in the manufacturing process, the carbon emissions generated by the raw materials must also be included in the calculation. From 2026, the affected industries will expand to include carbon emissions. Finished products containing more than 500 pounds of dense raw materials will be reduced to more than 100 pounds in 2028.
The CCA report submission time must be provided before June 30, 2025, and the greenhouse gas emissions, total product weight, power consumption, and whether the electricity comes from the power grid and not from the power grid are reported to the US Environmental Protection Agency. Taxes on greenhouse gas emissions produced by electricity must be paid no later than September 30, 2025. This bill does not apply to underdeveloped countries, including Afghanistan, Angola, Bangladesh, and a total of 46 countries.
2. List of industries regulated by CCA:
The following is a list of regulated industries classified under the 2023 North American Industry Classification System (NAICS) codes:
In addition to cement, electricity, fertilizer, steel, aluminum, hydrogen and other items controlled by CBAM, the US CCA Act also covers the petrochemical industry, adipic acid, paper mills, glass, ethanol and other items.
Refer to the trend of carbon tariff interest rates in the United States from 2024 to 2030
The initial cost of carbon tariffs on products manufactured or imported into the United States in 2024 will be set at $55 per ton. Starting in 2025, tariffs will be adjusted annually by an amount equal to inflation plus 5%. Conservative estimates suggest that by 2030, the carbon tariff rate is expected to exceed US$80/ton, and taking into account the severe inflation in the United States, it may reach more than US$90 by then.
The chart above shows the U.S. carbon tariff rate trend from 2024 to 2030 based on InfoLink Consulting Exhibit 1.
4. The main importing countries of 5 controlled products in the United States in 2021
According to the chart of InfoLink Consulting, in 2021, the products controlled by the United States, such as cement, glass products, steel products, aluminum, nitrogen fertilizers, etc., will be imported from Canada. Cement, steel products, aluminum and nitrogen fertilizers will account for the majority; glass products will come from mainland China. Imports, and Taiwan's industry on the list is steel products, ranking 5th. It is the fifth largest importer of steel products in the United States, accounting for 3.8%.
According to data from the International Trade Center (ITC), Taiwan’s top 10 items exported to the United States in 2022 are mechanical equipment (31.8%), electrical equipment (27.7%), auto parts (7.4%), and steel products (6.1%), plastics and their products (4.3%), precision instruments (3.2%), base metal products (1.8%), toys and sporting goods and other accessories (1.8%), steel raw materials (1.8%) and furniture (1.71 TP3T ).
Among them, products controlled by the U.S. CCA Act include steel products (such as screws, nuts) and steel raw materials (such as crude steel). In 2022, Taiwan's steel products exported to the United States ranked China's fourth largest export, accounting for 6.11 TP3T, with exports of approximately US$4.5 billion; steel raw materials exported to the United States ranked 9th, accounting for 1.81 TP3T, with exports of approximately US$1.3 billion.
For the United States, Taiwan is its second largest exporter, with exports worth approximately US$75.1 billion in 2022, an increase of 14% compared with the previous year. According to data from the International Trade Center, among the U.S. import control items in 2022, steel products and steel raw materials are both items on Taiwan's list.
In terms of steel products, Taiwan accounts for 3.7% of U.S. imports, ranking fifth. The top four countries are Canada (21.9%), Mexico (12.5%), Brazil (9.6%), and South Korea (6.1%); while the United States Among the steel raw materials imported from the world, the top five countries are China (26.9%), Mexico (13.5%), Canada (9.5%), Taiwan (8.6%) and South Korea (6.2%), with Taiwan ranking fourth.
Among Taiwan's exports of controlled products to the United States, steel and its products are mainly large quantities. If the emission coefficient of Taiwan's steel industry is lower than the U.S. average, CCA will not have much impact. According to a 2019 report by Global Efficiency Intelligence on "How Clean is the U.S. Steel Industry?" a typical blast furnace-converter (BF-BOF) in the United States emits about 1.8 tons of carbon dioxide per ton of steel (pictured) 1), and according to statistics (Figure 2), the global carbon dioxide emissions from blast furnace-converter steel in the United States are low. If electric furnaces (EAF) are used to make steel, the carbon dioxide emissions will be even lower (Figure 3). In addition, according to a report by the China Economic and Social Council in 2021, based on estimates from the National Greenhouse Gas Registration Platform of the Environmental Protection Agency of the Executive Yuan and the sustainability reports filed by China's major steel companies, the current average unit carbon emissions of domestic steel economic activities is 0.3 tons ~ 2.3 tons of carbon dioxide, the gap is quite large. Taiwan's steel industry can convert its equipment to electric furnace steelmaking to reduce carbon dioxide emissions, so as to gain an advantage in the US carbon tariff.
(Figure 1) Carbon dioxide emission flow chart of a typical BF-BOF blast furnace-converter steel plant in the United States
(Figure 2) Study on the carbon dioxide emission intensity of BF-BOF blast furnace-converter steel production in various countries in 2016
(Figure 3) Study on the carbon dioxide emission intensity of EAF electric arc furnace steelmaking in various countries in 2016
Finally, it can be seen from the "competition" bill that it mainly punishes manufacturers in carbon-intensive industries and improves the competitiveness of U.S. companies with relatively low carbon emissions. 70% of the U.S. steel industry is produced by melting scrap steel in electric arc furnaces. U.S. Steel The industry also claims that their carbon emissions are the lowest in the world and they have considerable competitive advantages against the EU's CBAM and CCA regulations.
Other industries under CCA control can focus on the glass industry. According to data from the International Trade Center, the United States will import approximately US$10.6 billion in glass from the world in 2022. The top five importing countries are China (33.5%), Mexico (18.6%), and Germany. (7%), Canada (5.4%), India (3.7%), and Taiwan ranks sixth. The United States imports more than 300 million US dollars of glass from Taiwan, accounting for 3.65% of the total imports of the United States from the world. Although it does not account for the top five, the glass manufacturing process consumes a lot of carbon dioxide. The International Energy Agency (IEA) states that global glass manufacturers emit approximately 86 million metric tons of carbon dioxide every year. However, Taiwan’s waste glass recycling rate is as high as 92%, ranking second in the world, only lower than Sweden’s 99%. If the use of raw materials (such as quartz) can be reduced, glass recycling or crushed glass can be used instead. The reduction of carbon dioxide emissions through reprocessing will bring greater advantages to Taiwan's glass industry. The lower temperature required to melt cullet can also reduce fuel use, thereby reducing carbon emissions.
According to data from the U.S. Environmental Protection Agency (EPA), 7 million tons of glass was buried as garbage in the United States in 2018 alone, accounting for 5.2% of all solid municipal waste. Only 31% of glass containers were recycled, which shows that the consumption in the United States Habits and environmental protection concepts still need to be worked on. If the method of glass recycling and remanufacturing can be implemented, it will have considerable advantages in Taiwan's glass exports.
Other products controlled by the CCA in the United States, such as aluminum, asphalt, cardboard products, lime and cement, etc., are not listed for the time being because the proportion of U.S. imports from Taiwan is very small, barely less than 1%. The impact on the above-mentioned controlled industries is not too great. into this discussion.
Comparison between Wu, CBAM and CCA
The Clean Competition Act proposed by the U.S. Senate has completed its second reading on June 7, 2022, and has transferred the bill to the Finance Committee. If the bill passes the third reading, it is expected to take effect as soon as 2024, and the tax will be imposed on U.S. imports. Domestic manufacturers and domestic manufacturers in the United States can obtain export tax rebates if they export to other countries.
In addition to the items covered by EU CBAM, the affected industries include the petrochemical industry, adipic acid, glass, pulp, cardboard, ethanol, etc. In 2026, it will be expanded to finished products with more than 500 pounds of carbon-intensive raw materials; in 2028 , the emission range of products reduced to more than 100 pounds of carbon-intensive raw materials includes scope 1 direct emissions and scope 2 indirect emissions.
Although there is no need to submit a certificate like the EU CBAM, you must provide proof of ISO 14067 carbon footprint verification. If the data is not verified or unclear, the taxable portion will be calculated based on the ratio of the GDP carbon intensity of the country of origin to the GDP carbon intensity of the United States. The economy Carbon intensity is equal to gross domestic product (GDP) divided by greenhouse gas emissions in the most recent year.
Land, conclusion and suggestions
The United States is Taiwan's main export market, and the U.S. Clean Competition Act is approaching fiercely. Taiwanese manufacturers should increase their awareness of the crisis. At present, the calculation standard of CCA is clearer than that of CBAM, and it is also a more familiar ISO standard in China. Therefore, companies can make sufficient preparations in advance. First, complete the carbon footprint inventory of controlled products to understand their carbon emissions, and make process reductions as soon as possible. Carbon measures to address future carbon tariff risks.
In addition to the EU CBAM carbon tariff policy and the US CCA bill, the UK is also currently planning to introduce its own UK CBAM. In March this year (2023), the UK’s newly established energy security and net zero department discussed launching the UK CBAM in 2026. It is expected that Covering metal, cement, chemical fertilizer and other industries, local British steel companies have also called for accelerating the implementation of the UK's CBAM to avoid the EU's CBAM carbon tariffs when exporting steel to the European market.
Although the CCA has not officially passed the third reading and the collection time may be extended, it can be expected that with the launch of the EU CBAM, the United States will not stop. Countries will also incorporate the carbon tariff system into national policy considerations one by one, and the scope of collection will be As it gets bigger, the carbon price will also increase year by year. Carbon inventory and reduction will be an indispensable step for enterprises to improve their competitiveness and sustainable development.
Finally, with regard to the trade policies introduced by European and American countries, small and medium-sized enterprises should regard them as a turning point. Through strategies such as improving equipment energy efficiency, manufacturing low-carbon products, strengthening technological innovation, and promoting green transformation practices, in addition to helping enterprises cope with climate change-related It also enhances the competitiveness of industrial exports and accelerates enterprises towards sustainable development.
Source:
1.InfoLink Consulting: https://www.infolink-group.com/energy-article/carbon-boarder-tax-how-the-us-plays-the-game
2. U.S. Global Efficiency Intelligence: https://www.bluegreenalliance.org/wp-content/uploads/2021/04/HowCleanistheU.S.SteelIndustry.pdf
Sponsor: Ministry of Economic Affairs, Small, Medium and New Enterprises Agency, Ministry of Economic Affairs
Execution unit: Plastic Industry Technology Development Center
