CBAM - Who Needs to Comply?
1. Carbon Border Adjustment Mechanism (CBAM)
In 2019, along with the European Green Deal which is the EU’s corporate sustainability roadmap, the EU announced Fit for 55, a policy package aimed at achieving carbon neutrality. As part of this initiative, the EU introduced the Carbon Border Adjustment Mechanism (CBAM).
a. Background of CBAM
Why did the EU introduce CBAM? The main reason is to prevent carbon leakage, where manufacturing facilities move from countries with strict carbon reduction regulations such as the EU to countries with weaker regulations. Without CBAM, the EU’s strong emission reduction policies could actually backfire by weakening its own competitiveness while increasing global carbon emissions. In short, CBAM requires that products exported to the EU from countries with weaker carbon reduction regulations pay a carbon cost based on the EU Emissions Trading System (ETS) price.
b. Scope of Application
CBAM applies to six industries: steel, aluminum, cement, fertilizer, electricity, and hydrogen. All products imported into the EU that include any of these items fall under the scope.
c. Implementation Period
During the transition period from October 2023 to December 2025, companies are only required to report and submit emissions data on a quarterly basis. Starting in 2026, annual reporting becomes mandatory along with the purchase of CBAM certificates corresponding to remaining emissions. Failure to comply, even during the transition period, will result in fines.
CBAM Certificate Price (1 per ton)= (Embedded emissions of the product × EU ETS carbon price − EU free allocation benchmark) − Carbon price paid in the country of production
*Embedded carbon emissions: The amount of carbon emissions contained in one ton of product. The calculation varies depending on whether the product is a simple or complex product, and the details are defined in Annex IV of the CBAM regulation.
d. Impact on Korea
According to the Korea International Trade Association, in 2022 Korea’s exports to the EU totaled 68.1 billion dollars, of which CBAM-covered items accounted for 5.1 billion dollars, or 7.5 percent of total exports to the EU. Steel made up the largest share at about 89.3 percent, making it the most affected sector, followed by aluminum at 10.6 percent.
2. CBAM 간소화
According to the Korea Customs and Trade Development Institute, 90 percent of CBAM-covered importers account for only 1 percent of total carbon emissions, while the remaining 10 percent account for 99 percent. To improve administrative efficiency, the EU adjusted the CBAM system in February 2025 as part of its Omnibus Package, a regulatory simplification policy.
Even with the simplification, Korea’s steel industry is still expected to face a significant impact from CBAM due to its high export volume to the EU. With the mandatory purchase of certificates approaching, companies need to quickly build the expertise and infrastructure required for calculating embedded emissions and meeting reporting obligations.
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