Korean steelmakers prepare for EU carbon tax

Korean steelmakers and other companies exporting goods to Europe are expected to pay a new carbon tax in the second half of 2023 as the European Union plans to make it more expensive to export steel, cement, fertilizer, aluminium, electricity and hydrogen to the continent. , according to industry officials Thursday.

Companies importing these goods into the EU will also have to buy certificates covering their CO2 emissions.

Mohammed Shahim, the European Parliament's lead law negotiator, said the border tariff would be critical to the EU's climate change efforts.

“This is one of the few mechanisms we have in place to incentivize our trading partners to decarbonize their manufacturing industries,” Shahim said.

The move aims to prevent European industry from being undermined by cheaper goods made in countries with weaker environmental regulations.

Korean steel companies, which constitute one of the main exports to the EU, will inevitably be directly affected.

The EU is expected to finalize a specific implementation date through additional discussions on the reform of the EU Emissions Trading System (ETS), which will become the standard for introducing a carbon tax once the Carbon Cap Adjustment Mechanism (CBAM) is introduced.

CBAM is a measure that estimates a product's carbon footprint and is charged by the EU ETS.

While CBAM has been promoted to meet the EU's carbon neutrality goal, there are concerns that it could become a trade barrier as exporting countries view CBAM as an additional tariff.

In the case of Korea, steel companies that inevitably emit carbon due to the nature of the manufacturing process are expected to be directly affected by CBAM.

Reporting will only be required for October next year, but there are concerns that if CBAM is implemented, production costs and unforeseen administrative expenses could rise sharply.

“CBAM may violate WTO rules, and we opposed the introduction of CBAM,” said the Korea Metal Industry Association.

Korea's exports to the EU totaled $4.3 billion in steel last year, more than aluminum ($500 million), cement ($1.4 million) and fertilizer ($4.8 million), according to the Ministry of Commerce, Industry and Energy. million dollars).

“Korea is one of the few countries that are currently successfully operating in the carbon credit market. It seems necessary that the Korean government take action to communicate that our country is already making enough efforts to reduce carbon emissions on its own so that our companies will be further burdened by CBAM,” said Shin Kyu Sub, a researcher at Korea International. Trade Association (KITA).