Climate and Competitiveness Border Carbon Adjustments in Action 2025

1.5 How leaders of carbon-intensive industries are responding to BCAs Company and sector profile The steel industry is a cornerstone of China’s economic might. It is also a primary source of its GHG emissions, contributing an estimated 1.8 billion tonnes of CO2, or about 15% of the national total. Domestically, inclusion of the steel sector in China’s national ETS forces producers to internalize what was once an externality. Although around 10% of its export volume goes to BCA-regulated markets, S Group’s proactive investments highlight both a viable path and critical policy gaps for China’s steel sector. With an annual crude steel output consistently exceeding 1 billion tonnes, China accounts for more than 54% of global production. S Group is a major, publicly listed steel producer with an annual capacity exceeding 30 million tonnes, with 12.9% of its production exported to more than 80 countries and regions. The company’s push towards electric arc furnace (EAF) and hydrogen-based production exemplifies the shift to “new quality productive forces”, aligning with the national carbon goals and positioning S Group for BCA- regulated markets. Business exposure and response Figure 1 compares the EU CBAM trade exposure for the iron and steel sector in the BASIC group of countries using data from the World Bank.41 The vertical axis shows the carbon payment per dollar of EU production and imports (%) – 17% for China, which is higher than South Africa and Brazil but lower than India. Trade dependence, measured as the share of China’s total iron and steel exports destined for the EU, is 13%, higher than Brazil but lower than India and South Africa.Projections suggest that BCAs could result in a 58% loss of export profits for Chinese steel exporters and a 32% reduction in export volume compared to the business-as- usual scenario.42 This represents a significant impact on a high-value business segment, compounded by the added complexity of monitoring, reporting and complying with Scope 1 and 2 emissions requirements. EU CBAM trade exposure (iron and steel) in the BASIC group of countries FIGURE 1CASE STUDY 1 China – S Group40 Sources: World Bank Group, CBAM Exposure Index Export of iron and steel to EU (% of exports iron and steel to world)00102030405060 5 10 15 20 25 30Carbon payment per $ of EU production and imports (%)China South Africa BrazilIndia Climate and Competitiveness: Border Carbon Adjustments in Action 11