According to Yeo Yeong-jun (Associate Research Fellow), Cho Hae-in (Associate Research Fellow) and Jeong Hoon (Research Fellow), the total burden of domestic industry in 2030 is projected to be about KRW 8,245.6B as the Carbon Border Adjustment Mechanism (CBAM) will be fully operational in the European Commission, which is expected to decrease by about 11.7% to 15.0% in policy scenarios assuming technological development and efficient energy transition following the implementation of carbon neutral policies. Their proposal also includes potential CBAM responses including: (1) establishing a monitoring framework and relevant governance for overseas tread such as international CBAM; (2) protection and support for carbon-intensive industries expected to be most affected by the CBAM; (3) improving energy efficiency by encouraging alternative cleaner production processes; (4) expanding renewable energy access; and (5) investment in promising low- and zero-carbon technologies (LZCs) and expansion of technological innovation. They have also emphasized that the CBAM is not a trade restriction; it is a momentum for more effective implementation of the domestic responses in terms of industrial structure and energy system in the global trends of carbon neutrality.
Emerging the carbon neutrality declarations and relevant policies around the world, in July 2021, the European Commission adopted a proposal for a new Carbon Border Adjustment Mechanism (CBAM) ensuring that production of carbon-intensive goods does not shift to countries outside the EU to take advantage of less stringent climate policies while preventing loss of competitiveness of their domestic industries. In this report, the amount of CBAM burden in 2030 when the CBAM will be fully in place is projected by sectors using an environmentally extended input-output table (EEIO) model, in consideration of variances caused by Korea’s carbon neutral policies, thereby suggesting takeaways upon the establishment of mid- to long-term strategies in response to the EU CBAM.
“The domestic industries expected to be most affected by the CBAM are backbones of South Korea; thus we must keep monitoring global policy trends, considering potentials of scaling up the CBAM, and establish pan-industry responses and decarbonization strategies for each industry against the CBAM,” said researchers. “It is necessary to actively respond to the global trend of carbon neutrality, and provide opportunities to discover new growth engines and to enhance industrial competitiveness, based on the comprehensive and structural CBMA strategies established and implemented.”
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