First Establishment of 'Budget for Carbon Border Adjustment Mechanism Response' in EU-Originated Carbon Invoice

Concrete ETS Development Strategy... Increase Ratio Within the Range That Can Handle Industrial Competitiveness

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government is establishing a new budget of 4.8 billion KRW for the 'Carbon Border Adjustment Mechanism (CBAM) Response Budget' to support the international community's transition to renewable energy and the realization of carbon neutrality. The aim is to develop an internationally accepted calculation framework and research calculation methodologies.

According to the Ministry of Economy and Finance and the Ministry of Environment on the 19th, this plan will be included as a major agenda item in next year's budget proposal. A Ministry of Environment official stated, "The European Union (EU) carbon border tax is expected to impact the steel sector," adding, "We plan to newly establish a budget for developing methodologies to calculate carbon emissions and for the international standardization of calculation criteria." The budget size will be finalized through further consultations with the Ministry of Economy and Finance, which oversees fiscal matters.

This is based on the judgment that standardization aligned with international standards is necessary to respond to the global trend of renewable energy transition.

EU Carbon Border Tax Inevitably Hits Domestic Steel Industry... ETS Development Strategy to be Detailed

Recently, the EU decided to impose a carbon border tax on products with high carbon emissions starting in 2023. The government expects significant impact on the steel industry, which has a high export ratio to the EU and high carbon emissions. According to the Korea International Trade Association, last year’s exports to the EU showed steel at $1.523 billion, the highest, followed by aluminum and fertilizers at $186 million and $2 million respectively.

Benefits from the Environmental Product Declaration (EPD) certification system are also expected to expand. Currently, using the EPD system provides benefits such as inclusion as a green product for local government mandatory purchases, recommendations for government and public institution awards related to climate change response, and a 2-point bonus in the green company designation system. The EPD system quantitatively indicates the environmental impact throughout the entire lifecycle of products and services, including raw material extraction, production, transportation/distribution, use, and disposal. It is currently implemented in countries such as the United States, Canada, Sweden, and Japan.

President Moon Jae-in previously stated, "We will actively respond to changes in the international order, including the introduction of carbon border taxes, as well as systems for greenhouse gas measurement and evaluation." The increase in budget is also aimed at responding to the carbon border tax advocated by the international community.

Meanwhile, the government plans to increase the proportion of paid allowances within the emissions trading system (ETS) to a level manageable by industrial competitiveness. The proportion of paid allowances, which require purchasing emission permits, will be expanded from the current 3% to over 10% after 2021.

Regarding this, Professor Jeong In-gyo of Inha University’s Department of International Trade emphasized, "The EU ultimately aims to secure excess tax revenue, so it is necessary to examine whether there are any issues under international norms," adding, "It is important to accurately calculate the carbon emissions of major export industries."

This content was produced with the assistance of AI translation services.