On July 14, the European Union (EU) implemented the “Fit for 55” legislation package, which will levy taxes on carbon emissions caused by imports, as a measure for achieving carbon neutrality. This climate change response strategy comes in support of the European Green Deal, aimed at making Europe carbon neutral by 2050.
On July 14, the European Union (EU) implemented the “Fit for 55” legislation package, which will levy taxes on carbon emissions caused by imports, as a measure for achieving carbon neutrality. This climate change response strategy comes in support of the European Green Deal, aimed at making Europe carbon neutral by 2050.
* Fit for 55: A set of 12 policies for reducing greenhouse gas emissions to at least 55% of the1990s level by 2030. These policies include carbon border adjustment, consolidated emission standards for cars, and an expansion of the emissions trading system to apply to shipping and aviation.
The EU’s novel Carbon Border Adjustment Mechanism (CBAM) imposes a levy on imports tantamount to that on EU products to reduce carbon emissions. The purpose of the levy is to secure equity among products by paying the same emissions tax on imports as EU products, preventing EU businesses from shifting their production facilities out of the EU to evade emissions levies.
Once the CBAM is in place, importers will be required to declare total greenhouse gas emissions caused by imports both directly and indirectly, and secure a CBAM certificate before importation, issued based on a comparison with the average greenhouse gas emissions from production within the EU.
If an emissions trading cost for a particular import is covered at its origin, an importer can request an exemption equivalent to that payment. The standard for such an exemption will be determined based on the standards of the total greenhouse gas emissions calculation and comparison applied to the CBAM.
As EU importers of steel products will incur the additional cost of a CBAM certificate purchase, one expected implication is that Korean steelmakers will be driven to reduce export prices and experience reduced export volumes.
In response to the EU’s CBAM, Hyundai Steel submitted a proposal to the Korean Ministry of Trade, Industry and Energy that explains how we will cooperate with the European Commission in bringing about mutual exemptions and simplified procedures in emissions trading. Hyundai Steel will be engaging in ongoing outreach to the Korean government to enable intergovernmental negotiations that can minimize financial burden on foreign importers.