The Path of Carbon Footprint: A Growing Pass in Global Trade

The European Union currently is introducing the EU's Carbon Border Adjustment Mechanism (CBAM). Starting in October 2023, importers of products subject to this mechanism will submit quarterly reports to the EU, allowing them to track how they are impacted by it during a transition phase that ends December 31, 2025. Effective January 1, 2026, the CBAM goes into effect fully, requiring that all importers purchase CBAM certificates based on the amount of carbon dioxide emitted during the manufacturing of their products. The amount of carbon dioxide that will be paid for by importers will be equivalent to the amount paid by domestic manufacturers who are covered under the EU Emissions Trading System (EU ETS), currently set at approximately €72 per metric ton.

For Chinese photovoltaic products, CBAM poses a direct cost challenge. According to industry analysis, Chinese PV module exporters would need to pay an average supplement of €12 per kilogram of CO₂ under CBAM - an amount equivalent to roughly 15% of product selling price. Worse still, the mechanism employs a phased tightening approach: a simple data reporting phase from 2023 to 2025, mandatory CBAM certificate purchases starting in 2026, and complete elimination of free allowances by 2034. This gradual escalation leaves exporters no option but to continuously invest in decarbonization across their entire value chains.

The initial scope of CBAM is six sectors (cement, electricity, fertilizers, iron and steel, aluminum and hydrogen). The European Commission completed its first review of potential additional product categories at the beginning of 2025 and identified that photovoltaic modules remain under consideration for potential addition. The European Solar Manufacturing Council (ESMC) has asked the European Commission to expand CBAM coverage to downstream solar products, including solar panels, mounts, and trackers. The ESMC argues that finished solar products entering the EU from non-EU countries do not incur the same carbon cost as European manufacturers and therefore compete unfairly against them. Whether this will be successful is unknown but clearly shows a trend toward expansion in the future.

Behind CBAM lies a complex system of carbon footprint calculation rules. In July 2025, the European Commission's Joint Research Centre released a harmonized set of rules for calculating PV module carbon footprints, drawing upon the EU Environmental Footprint method and Product Environmental Footprint Category Rules for photovoltaics. The coverage spans product range and system boundaries to data usage and life cycle stages, reflecting a comprehensive attempt to standardize carbon accounting for PV imports.

China - in particular its PV industry - has not stood idly by in the face of these mounting carbon trade barriers. At the government level, the National Energy Administration has published the "Quantification Methodology and Evaluation Standard for Life-Cycle Carbon Emissions of Photovoltaic Power Generation Projects" (NB/T 11905-2025), set to take effect on June 18, 2026. This standard applies to centralized PV projects, establishes the quantification methodology, system boundaries, data collection requirements, and evaluation indicators for life-cycle carbon emissions, and provides standardized templates for evaluation reports.

In 2023, governmental institutions are expected to actively participate in developing PV industry standards in both China and other countries, establishing a common standard among all parties involved in PV manufacturing and/or implantation of PV modules. Some major Chinese companies such as LONGi Green Energy, JinkoSolar, Trina Solar, JA Solar, Astronergy, and Tongwei have already begun establishing common ground between themselves on what types of performance-based metrics they would like to see incorporated into these new standards. As an example, China Chamber of Commerce for the Import & Export of Machinery & Electronics (CCCME) and China Quality Certification Centre (CQC) convened representatives from multiple large Chinese manufacturers to participate in developing WMT 19-2025, "Low Carbon Evaluation Requirements for Exported Photovoltaic Modules." The first set of requirements developed for performance-based evaluations was released June 16, 2025, with an effective date of January 1, 2026. The requirements outline a standard approach to defining functional units, establishing system boundaries for the scope of the evaluation, defining a standard allocation of data, calculating results, assessing the quality of data, and reporting of low-carbon evaluations on exported PV modules. By creating a scientifically credible methodology, the latest efforts to develop this standard set the stage for the establishment of low-carbon development guidelines for manufacturers engaged in exporting PV modules. Furthermore, these efforts provide manufacturers valuable experience in working toward developing international standards so that they may more easily gain recognition for manufacturing and exporting PV modules with low-carbon footprints.

China is thus pursuing a dual-track response to carbon trade barriers: building a rigorous domestic standard system on the one hand, while engaging with the international community on carbon accounting methodologies and mutual recognition on the other.

While Europe has focused on carbon pricing mechanisms, the United States is quietly advancing complementary green trade rules centered on end-of-life equipment recycling. The European Union already set precedent by incorporating PV modules into the Waste Electrical and Electronic Equipment (WEEE) Directive, which imposes extended producer responsibility for collection and recycling, with minimum recovery targets of 85% by weight and recycling targets of 80% for PV modules. Manufacturers that fail to meet recycling requirements face exclusion from the EU market.

Now the United States is following a similar path. At the federal level, recycling requirements for PV panels have been advanced under the Resource Conservation and Recovery Act framework. More proactively, numerous states have enacted or introduced legislation establishing PV module stewardship and take-back programs:

Washington State: Washington's SB 5175, signed into law in June 2025, represents one of the most comprehensive state-level solar recycling frameworks in the United States. The bill requires manufacturers to finance the take-back and recycling system for PV modules sold in the state, with reporting obligations starting April 1, 2026. Beginning January 31, 2029, no manufacturer, distributor, retailer, or installer may sell or offer for sale a PV module in the state unless the manufacturer has submitted an approved stewardship plan.

In parallel, states such as New Jersey and California are also advancing legislation regulating solar equipment removal and recycling, with California additionally exploring universal waste designations for PV modules intended for recycling. Together, these state-level initiatives point toward a broader national green trade barrier that could raise the bar for market access even without federal comprehensive carbon legislation.

Green trade rules are no longer a distant prospect on the horizon - they are the current reality of international commerce. From Europe's CBAM and comprehensive carbon footprint reporting requirements to the multi-layered sustainability mandates woven into EU public procurement and renewable energy auctions, the message is unambiguous: carbon emissions have become a currency in their own right. For Chinese manufacturers, the response must be as systematic as the challenge itself. The ongoing development of national and industry standards, combined with proactive industry participation in global standard-setting, suggests that China is transitioning from a reactive posture to one of leadership in shaping the rules of green trade. For the global PV industry, the carbon footprint has truly become an international pass - and those who fail to secure their credentials will find themselves increasingly locked out of the world's most important markets.