China follows on green tech development which increases trade with US

We have constructed a theoretical model of the impact of carbon tariffs on agricultural trade, and selected the United States, European Union and Japan as mock objects to impose carbon tariffs.. In this scenario, we will comprehensively discuss the impact of carbon tariffs on China’s agricultural trade. The reasons why we chose the United States, the European Union and Japan as mock objects are as follows: In recent years, China’s agricultural exports to the United States, the European Union and Japan have also gradually increased. According to China’s customs statistics, from 2002 to 2019, China’s agricultural exports to the European Union increased by 4.9 times; the average annual growth rate is 11%. The average annual growth rate of China’s agricultural exports to the United States reached 2.7%, and China’s agricultural trade with Japan continued to grow. Under the influence of the COVID-19 pandemic, China’s agricultural exports to the United States, Europe and Japan continued to grow from January to August 20221 (Figure 1). The above facts indicate that China’s agricultural trade cooperation with the United States, the European Union, and Japan is very close. In addition, Europe is one of the first regions in the world to propose carbon tariffs; once European and American countries impose carbon tariffs on China, it will have a significant impact on China’s agricultural trade. Thus, we selected the United States, Europe and Japan as mock objects.

The issue of hidden carbon in agriculture has increasingly become a focus of attention in the field of carbon research. The impact of carbon tariffs imposed by Europe and America on China will become increasingly significant as bilateral agricultural trade continues to grow. The specific impacts include:

(1) Carbon tariffs may increase the cost of Chinese agricultural exports, making them less competitive in European and American markets. (2) Due to the decline in competitiveness of agricultural products, China may need to find alternative markets for its agricultural products, thereby increasing trade activities with countries without carbon tariffs. (3) The carbon tariffs of European and American countries may encourage China to implement more sustainable and low-carbon agricultural reforms, which means reducing its carbon footprint through technological innovation. (4) If China considers carbon tariff measures to be trade protectionism, it will trigger bilateral trade disputes and further worsen trade relations.

Carbon tariffs will inhibit the international market demand for taxed products, thereby affecting the output of relevant taxed departments in the exporting country. The simulation results of the output changes in various sectors of agricultural products in China are as follows (Table 5):

In control group 1 (scenarios S1, S2, and S3), the United States, Japan, and Europe simultaneously imposed carbon tariffs on China in the economic environment of 2022, 2025, and 2030. From a horizontal perspective, the output of most sectors decreased, with meat and other agricultural products experiencing the largest decline, reaching 0.14% and 0.19%, respectively, while the output of the oil, fruit and vegetable, and dairy products sectors increased, with the largest increase in oil production, reaching 14%. By 2030, the impact of carbon tariffs on the output of the agricultural sector will fluctuate smoothly. The output of rice, grains, tobacco, and aquatic products experienced such a great increment after the carbon tariff between S2 and S3, for the carbon intensity of these products is generally lower than that of other agricultural products. A carbon tariff would increase the cost of producing products with high-carbon emissions. As a result, producers have an incentive to shift production to products with lower carbon emissions. In this case, rice, grain, tobacco, and aquatic products are less carbon-intensive than other agricultural products and thus more attractive to producers after a carbon tariff, which could lead to a shift in the production for these products, further increasing their output.