South Korea to set up government body to navigate EU's CBAM, global environmental policies

South Korea has decided to establish a government body specialized in tackling the EU's carbon border adjustment mechanism and other international environmental regulations, a government official said Feb. 7.

From 2026, the EU's CBAM is expected to impose a significant carbon tax on iron and steel, cement, fertilizer, and aluminum exported from South Korea to the EU markets. Setting a dedicated government body is important for supporting local manufacturers to mitigate the impacts of the EU's CBAM and upcoming CBAM-alike policies.

"The Ministry of Environment will set up an International Cooperation Bureau that will manage international environmental regulations such as the European Union's upcoming Carbon Border Adjustment Mechanism, or CBAM," an official of the environment ministry said.

"The new bureau will be officially launched Feb. 25 when a related law is enacted," the official added.

The official said the new bureau will also oversee the country's activities under international agreements, including the United Nations Framework Convention on Climate Change and the Convention on Biological Diversity. The bureau will also take charge of negotiations on a global treaty to combat plastic pollution.

Since last year, South Korea's Ministry of Trade, Industry and Energy, or MOTIE, has hosted a set of briefing sessions for local companies to help them prepare for the CBAM amid concerns about rising costs for businesses due to the climate-related requirements, such as the use of clean energy.

MOTIE said the country is seeking ways to protect its energy-intensive manufacturers, which heavily rely on international trade, from the impacts of the EU's carbon policy and other international environmental regulations.

On Jan. 17, MOTIE announced that South Korea agreed to join hands with Japan to keep the CBAM from acting as a trade barrier while seeking joint moves to address carbon-related trade restrictions.

S&P Global Commodity Insights forecasts showed that from 2026 to 2040, South Korea's total CBAM-liable carbon footprint will be 108 million mtCO2e, ranking it ninth among all CBAM-liable countries.

Addressing challenges

Under the EU's CBAM, the carbon tax will be charged based on the difference between carbon prices in the exporter's market and EU markets. South Korea is one of the few Asian countries with a national compliance emission trading scheme, or ETS, that covers CBAM-liable sectors. However, the carbon price gap between Korean ETS and EU ETS is still very significant, which implies heavy CBAM costs.

Platts, part of Commodity Insights, latest assessments showed that the carbon price in Korea ETS was at Won 9,500/mtCO2e ($6.58/mtCO2e) Feb. 7 and the EU ETS price was at Eur 81.69/mtCO2e ($84.92/mtCO2e) on Feb. 6.

Some Asian countries have adopted approaches similar to South Korea in addressing CBAM.

For instance, China's environment ministry has also established a dedicated government body called the National Center for Climate Change Strategy and International Cooperation to negotiate with the EU to address CBAM-related agendas.

Meanwhile, like South Korea and Japan, BASIC (Brazil, South Africa, India, and China) has also formulated an alliance to negotiate with the EU on CBAM and other carbon-related trade restrictions. Policy analysts expect the next UN Climate Change Conference, COP30 in Brazil, to become a CBAM COP to set an official stage for these alliances to negotiate with the EU.