The European Union's Carbon Border Adjustment Mechanism (CBAM) took effect on January 1, 2026, marking the first global cross-border carbon pricing system. This new regulation impacts energy-intensive industries, including steel, and aims to internalize carbon costs in international trade. 

As the world's largest steel producer, China's exports to the EU will face increased costs due to higher carbon emissions from traditional steel production methods compared to the EU's electric furnace processes.

The CBAM will apply a carbon tax based on the product's carbon footprint, significantly raising costs for Chinese exporters. It will put pressure on China's competitiveness, which has relied on price advantages in the European market. Over time, the CBAM may force China's steel industry to accelerate low-carbon transformation.

In the long term, the CBAM will reshape global trade and the supply chain structure. To adapt, Chinese steel companies must innovate by adopting low-carbon technologies and improving compliance with carbon measurement standards. 

Additionally, expanding markets in regions with more relaxed carbon policies and enhancing international carbon market cooperation will be crucial for mitigating the impact.