The robustness and disturbance within China's industrial complex network under carbon border tariffs

Abstract

Since the European Commission proposed in July 2021 to implement a Carbon Border Adjustment Mechanism (CBAM), the impact mechanism has received increasing attention worldwide. This study aims to analyze the impact of carbon border tariffs on China's carbon-intensive industries and simulate the risk transmission within China's industrial complex network based on the complex network modeling and cascading failure analysis. The results showed that the industries subject to carbon border tariffs played an essential role in China's entire industrial structure, which is closely related to industries including construction, metal, and manufacturing. If the carbon border tariffs are imposed on the steel industry, China's relevant industries will be reduced by 1.29%, followed by the fertilizer industry and non-ferrous metal industry with proportions of 1.11% and 0.95%, respectively. When the industrial transmission threshold reaches 0.8, the export shocks will affect the entire industrial network, leading to a rapid growth in the number of infected industries. By depicting the industrial linkage and impact mechanism of carbon border tariffs, this study is expected to provide practical suggestions and implications for carbon-intensive industries towards sustainable low-carbon transition under carbon border tariffs.

Keywords: Carbon border tariffs; Complex network; Input-output analysis; Risk transmission.