A Red Flag for Korean Exporters
The European Union is predicted to adopt a carbon border adjustment mechanism (CBAM) this year for actual implementation in 2023 at the latest.
The concept of carbon border adjustment can be defined as taxation proportional to the use of fossil fuels in products. The concept is predicted to take the form of fines, tariffs, offshore carbon credits, etc.
The South Korean government is working on measures to respond to the implementation. “It is said that carbon border adjustment is likely to be contradictory to the principles and rules of the WTO, and the design and operation of the concept need to be managed with transparency so that it does not become another trade barrier,” the Ministry of Trade, Industry and Energy explained.
“Despite international concerns, carbon border adjustment is inevitable and is a predictable variable,” the Ministry of Environment said, adding, “The United States is also planning to link greenhouse gas reduction goals to trade agreements, which means it may adopt carbon border adjustment as well.”
It is likely to spread worldwide this year, when climate change response and carbon neutrality will be two of the biggest issues. In addition, it is likely to become a new economic barrier based on the European initiative and the Joe Biden administration’s environmental policies.