Korean steelmakers on alert over initiation of EU carbon border tariff

The Korea Times

The Korea Times

Business

Wed, November 29, 2023 | 23:50

Companies

Korean steelmakers on alert over initiation of EU carbon border tariff

Posted : 2023-10-03 16:28

Updated : 2023-10-04 15:39

A POSCO employee works at the No. 3 blast furnace of the company's main steel mill in Pohang, North Gyeongsang Province, in this November 2022 file photo. Courtesy of POSCO

By Park Jae-hyuk

The European Union began forcing POSCO, Hyundai Steel and other Korean steelmakers to report carbon emissions from production every quarter, threatening to impose penalties of up to 50 euros ($52) per ton on companies that do not comply with the new rule.

This came as the Carbon Border Adjustment Mechanism (CBAM), which is known as the world’s first carbon border tariff, entered into the transition phase on Sunday. The European Commission plans to start fully implementing the CBAM from January 2026, to force exporters of iron and steel, aluminum, cement, electricity, fertilizers and hydrogen to buy certificates to cover their carbon emissions.

In 2022, Korea exported $4.3 billion worth of steel, $500 million worth of aluminum, $4.8 million worth of fertilizers and $1.4 million worth of cement to EU nations. Steelmakers are therefore expected to face the most significant impact from the new regulation.

Although the EU will not collect any carbon emission charges at the border by the end of 2025, the Korea International Trade Association (KITA) said that it will be burdensome for companies to calculate and report on their carbon emissions.

“The draft implementing regulation includes an article that could cause a leakage of confidential information from Korean companies,” KITA Brussels Office Executive Director Cho Bit-na said.

The Korea Trade-Investment Promotion Agency (KOTRA) urged companies subject to the CBAM to take preemptive measures, such as checking carbon footprints.

“Until its implementation in 2026, they should keep a close watch on possible changes to the rule,” the agency said in its report.

In collaboration with the government, steelmakers have informed the EU of their concerns, while making continuous efforts to minimize the negative effects of the CBAM.

Since August last year, POSCO has run an in-house task force to counteract the CBAM. As part of its efforts to achieve carbon neutrality by 2050, the steelmaker has also developed technology for hydrogen-reduction ironmaking and secured low-carbon materials.

“We have sought to reduce carbon emissions through the use of eco-friendly materials and electric smelting furnaces, carbon capture, utilization and storage (CCUS) technologies, and hydrogen reduction ironmaking,” a POSCO official said.

Hyundai Steel has also increased production using electric arc furnaces. It plans to transition to hydrogen reduction ironmaking.

“Carbon neutrality is not a choice. It is compulsory, so we will make every effort to secure new growth engines and become a sustainable and eco-friendly steelmaker,” Hyundai Steel CEO An Tong-il said in April, disclosing the company’s plan to reduce its direct and indirect carbon emissions by 12 percent by 2030, as part of its efforts to achieve net zero by 2050.

pjh@koreatimes.co.kr