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Key Points and Implications of the EU Carbon Border Adjustment Mechanism Legislative Proposal

Author

Listed:
  • Lim, Soyoung

    (Korea Institute for Industrial Economics and Trade)

  • Yang, Jooyoung

    (Korea Institute for Industrial Economics and Trade)

Abstract

On July 14, 2021, the European Commission announced its Fit for 55 package to reach the EU’s climate target of cutting emissions by 55 percent by 2030. A Carbon Border Adjustment Mechanism (CBAM) legislative proposal was introduced as part of this package. The proposal describes the mechanism and scope of CBAM, emissions calculation methods, and exclusions. It follows the method by which Emissions Trading Schemes (ETS) operate for EU importers. During a transitional phase, imports must be accompanied by a mandatory reporting of carbon data. Starting in 2026, following the conclusion of a transitional period, importers will be required to buy certificates with carbon prices determined by the EU ETS. Through an examination of Korea’s domestic ETS and an identification of the country’s strengths, this analytical brief explores ways to minimize the potentially negative impacts of ETS on Korean industries.

Suggested Citation

  • Lim, Soyoung & Yang, Jooyoung, 2021. "Key Points and Implications of the EU Carbon Border Adjustment Mechanism Legislative Proposal," i-KIET Issues and Analysis 21/16, Korea Institute for Industrial Economics and Trade.
    • Handle: RePEc:ris:kietia:2021_016
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    More about this item

    Keywords

    CBAM; carbon border adjustment mechanism; carbon tax; carbon pricing; emissions trading scheme; ETS; climate change; greenhouse gas; GHG; environmental policy; carbon policy; EU; Korea; industrial policy;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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