Carbon risks increasingly affecting South Korean companies
The European Union plans to impose carbon taxes at borders from 2023. This in order to better protect European companies and to offset the huge tax expenditures attributable to COVID-19.
The European Commission announced on July 11 that the European Union would release the Fit for 55 legislative package on July 14. The idea is to reduce the European Union’s average carbon emissions by 55 percent from 1990 to 2030. Details of the European Union The Carbon Border Adjustment Mechanism (CBAM) will also be released on July 14. This involves levying fees on non-European companies emitting more carbon than European companies.
The annual border carbon tax is expected to reach nine billion euros in 2030 after a gradual increase from 2023. Most of the money will be spent to cover commitments from the EU’s economic stimulus fund which is set to increase. ‘amount to 750 billion euros.
The first tax is likely to be applied to steel, cement and fertilizers and is likely to affect Russian companies in particular. Several governments, including the United States and South Korea, oppose the plan, saying the measure may violate WTO rules.
The carbon tax at the border is expected to have a serious impact on South Korean exporters. Substantial additional costs are likely to become inevitable in its main export industries such as steel, petrochemicals, machinery and equipment.
The Korea Institute for International Economic Policy said in its recent report that the annual carbon tax at South Korea’s border would reach $ 1,061 million assuming the tax would be 30 euros per tonne of carbon dioxide. . “This equates to an additional tariff of around 1.9%,” the institute explained, adding: “Taxes on the machinery and equipment sector, the chemical and non-metallic sector and the metallurgical industry are estimated at 186 million dollars, 153 million dollars and 135 million dollars, respectively.
It remains to be seen whether CBAM will be implemented as planned. Indeed, this may constitute a violation of the principle of national treatment of the WTO. In addition, a large number of countries are opposed to the possibility of CBAM becoming another tool of trade protectionism. Even some members of the European Union, including Germany, are passive in introducing CBAM.