EU aims to extend regulations to processed steel and aluminum goods by 2028, though specific items remain unconfirmed
Seoul urges Brussels to minimize covered items and secure a sufficient transition period
The South Korean government has mobilized support for domestic exporters in anticipation of the European Union's expansion of its Carbon Border Adjustment Mechanism (CBAM). As the EU pushes to broaden the scope of its regulations to processed steel and aluminum products starting in 2028, the burden of managing carbon emissions is increasingly likely to spill over to the auto parts and home appliance industries.
On the 23rd, the Ministry of Trade, Industry and Energy (MOTIE) hosted an information session for exporters at the Trade Tower in Gangnam-gu, Seoul, to prepare for the inclusion of downstream products under the EU CBAM. The briefing was organized to brief the industry on the EU's proposed regulatory amendments and discuss response strategies for individual companies.
The CBAM is a system that imposes a carbon price on greenhouse gas emissions generated during the production of goods imported into the EU. It took full effect this January, initially targeting six sectors: steel, aluminum, cement, fertilizers, electricity, and hydrogen.
Expansion to Processed Goods Targeted for 2028, Escalating Carbon Costs and Verification Burdens
The EU is pursuing plans to extend the scope of the CBAM to downstream products processed from steel and aluminum starting January 2028. This move is designed to plug a loophole whereby importers could bypass regulations by bringing in finished goods if carbon costs were levied only on basic materials.
The expansion proposal could encompass a wide array of product categories, including auto parts, home appliances, and industrial machinery. The specific items subject to the rules will be finalized following the EU’s internal legislative procedures.
Should the regulations be expanded, EU importers of these goods will incur costs associated with purchasing CBAM certificates. Domestic exporters will likewise need to comply with demands to submit and verify carbon emission data during transactions, and these related expenses are likely to be factored into export prices and contract terms.
Auto parts and home appliances, in particular, are manufactured by combining various raw materials and components, such as steel and aluminum. Companies will be required to secure emissions data from raw material suppliers, calculate carbon footprints for each product, and prepare the documentation necessary for verification.
Because supply chains for these sectors are more complex than those for basic materials, individual firms may struggle to gather all requisite information independently. For small and medium-sized suppliers lacking adequate carbon management systems, additional facility investments and verification costs could prove to be a heavy financial burden.
Government Asks EU to Minimize Scope, Pledges Expanded Corporate Support
The South Korean government is engaging in consultations with the EU to mitigate the burden on domestic companies stemming from the broadened regulations.
During the 14th Korea-EU Free Trade Agreement (FTA) Trade in Goods Committee meeting held on the 21st, MOTIE conveyed the domestic industry's concerns regarding the wider application of the CBAM.
Seoul requested that the EU minimize the number of items subject to the expanded downstream rules in 2028 and grant an adequate transition period for businesses to adapt to the system. It also demanded institutional improvements to ensure that domestic verification agencies receive prompt accreditation on equal footing with bodies inside the EU.
At the briefing on the 23rd, authorities introduced recent trends in EU CBAM revisions alongside concrete response strategies for downstream enterprises. The government plans to identify industry bottlenecks arising from the regulatory expansion and formulate support measures.
"Following the rollout of the CBAM this year, its application is set to widen to downstream goods, raising concerns that export companies will face a substantially heavier burden," said Kim Jang-hee, Director-General for New Trade Strategy at MOTIE. "Because downstream products feature more complex supply chains than basic materials—leaving individual firms with limited capacity to cope on their own—we will maintain ongoing consultations with EU authorities and establish a robust, tailored support framework to minimize the industry's burden."
The government plans to continuously monitor EU regulatory developments while assisting domestic companies with practical tasks such as calculating and verifying carbon emissions.
Should regulations expand to cover manufactured goods like auto parts and home appliances, domestic corporations will likely need to secure the capability to manage carbon emission data spanning from raw materials to finished products, complementing their existing advantages in quality and price competitiveness.
