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

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, andexclusions.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