Will Carbon Tariffs Have an Impact on the Textile Industry and Flame Retardant Fabric Industry?
CBAM is a new carbon border adjustment mechanism proposed by the European Union. CBAM will be implemented in October 2023, but initially a simplified version of CBAM will be adopted, forcing importers to collect and report carbon data. From 2026, the complete CBAM will be implemented, and the tax amount will be linked to the EU carbon market price.
Will carbon tariffs have an impact on the textile industry and flame retardant fabric industry?
Carbon tariffs cover imports of steel, aluminum, cement, fertilizers, electricity, and hydrogen, and their impact on different industries cannot be generalized. The textile industry is not directly affected by carbon tariffs. The flame retardant fabric industry is an industry that involves fire safety. The products manufactured in this industry are usually used in construction, automobile, aviation and other fields, as well as personal protective equipment. Therefore, products in the flame retardant fabric industry are considered to be related to public safety and health. At present, there is no official information on the impact of CBAM on the flame retardant fabric industry.
So will carbon tariffs extend to textiles in the future?
This should be viewed from the policy perspective of carbon tariffs. The reason for implementing carbon tariffs in the European Union is to prevent "carbon leakage" - referring to EU companies transferring production to countries with relatively loose emission reduction measures (i.e. industrial relocation) in order to avoid the high carbon emission costs within the EU. So in principle, carbon tariffs only focus on industries with a risk of "carbon leakage", namely those that are "energy intensive and trade exposed (EITE)".
Regarding which industries are at risk of "carbon leakage", the European Commission has an official list that currently includes 63 economic activities or products, including the following items related to textiles: "Preparation and spinning of textile fibers", "Manufacturing of non-woven fabrics and their products, excluding clothing", "Manufacturing of man-made fibers", and "Textile fabric finishing".
Overall, compared to industries such as steel, cement, ceramics, and oil refining, textile is not a high emission industry. Even if the scope of carbon tariffs expands in the future, it will only affect fibers and fabrics, and it is highly likely to be ranked behind industries such as oil refining, ceramics, and paper making.