Carbon border adjustment measure scheduled to take effect in 2023
The European Union's carbon border adjustment measure (CBAM) is expected to take a toll on local steel and petrochemical companies, with the Korean government scrambling to brainstorm countermeasures before the new measure takes effect in 2023.
The measure is aimed at increasing tariffs on imported goods based on the level of carbon content, in an effort to slash carbon emissions and reduce their impact on climate change. The measure will mark the world's first tax on carbon contained in traded goods. It will be applied heavily to the production of steel, which emits large amounts of greenhouse gases relative to other industries.
The process of making steel, by heating iron ore with carbon, forms carbon dioxide as a byproduct. Producing one ton of steel generates almost two tons of carbon dioxide.
"The EU carbon border adjustment tax will affect all local industries that emit greenhouse gases. In particular, the steel industry will be impacted the hardest. There needs to be a national strategy, and the industry and government need to cooperate to minimize any negative effects from the measures," a major steel industry official said.
On Sunday, the Ministry of Trade, Industry and Energy initiated a study of carbon border tariffs' impacts on the local steel industry while coming up with strategies to enhance local competitiveness.
"The carbon border adjustment measures will establish new trade barriers, which will have a drastic effect on our overall industry, as the country is heavily reliant on exports," the trade ministry said. "If we do not prepare in advance, our competitiveness in steel exports will experience a significant decline due to its nature as a high emitter of carbon."
The government plans to utilize the study results in numerous forums, including in the upcoming OECD Steel Committee meeting and Global Forum on Steel Excess Capacity (GFSEC) in September, the G20 summit meeting in October, and in diverse EU and U.S. channels to better convey Korea's stance on the issue.
The carbon border tax will be applied to steel products that emit more carbon emissions than those made in EU member states.
The EU plans to unveil the draft bill on July 14, while applying the tax in phases starting in 2023 to products that have high carbon emissions, including steel, aluminum and cement.
"We will analyze the draft bill and review the impact on our steel industry. We will then provide our position on the matter and countermeasures for the impacted industries," the trade ministry said.
The Korean government has unveiled a vision of achieving carbon neutrality by 2050 and seeks to establish an action plan to better fulfill that goal.
POSCO, which produces 70 percent of the local steel industries' carbon emissions, was the first steel company in Asia to vow to achieve carbon neutrality by 2050.
Through hydrogen-based steelmaking, the country's leading steelmaker plans to cut carbon emissions by 20 percent by 2030 and 50 percent by 2040. POSCO also aims to develop eco-friendly products, including high-tensile steel and highly efficient electrical steel.
"Carbon neutral measures constitute a new paradigm in the industry, and an estimated 68.5 trillion won will be spent towards carbon neutrality and other eco-friendly efforts," Kim Hak-dong, head of POSCO's steel business, said at a recent event hosted by the Federation of Korean Industries.
However, many experts remain skeptical about the country's goal of achieving carbon neutrality by 2050.
"Local companies have been announcing measures to become carbon neutral first without having the means to do so, in order to please the government. However, it will be nearly impossible to fulfill the carbon neutrality goal within the stated period. Not only the companies, but also the government and lawmakers need to be onboard with this goal. They need to be working together in passing new laws to aid companies' efforts, so that they have a chance to meet the 2050 goal," an industry source familiar with the matter said.
Source: https://m.koreatimes.co.kr/