Understanding the EU CBAM
The EU Carbon Border Adjustment Mechanism (CBAM) imposes a carbon cost on imported goods equivalent to what EU domestic producers pay under the Emissions Trading System (ETS). Its core purpose is to prevent carbon leakage — the phenomenon where production shifts to countries with less stringent climate regulations to gain a price advantage.
During the transitional period from October 2023 through December 2025, EU importers were only required to submit quarterly emission reports. However, with full enforcement beginning in January 2026, importers must now purchase CBAM certificates to cover the embedded emissions of imported goods.
Covered Products
The EU plans to gradually expand coverage to organic chemicals, plastics, and glass, making early preparation essential even for companies not currently affected.
Impact on Korean Exporting SMEs
South Korea is a top steel exporter to the EU, with steel exports valued at approximately $3.8 billion in 2025. SME-produced intermediates and components account for a significant share, meaning the impact of CBAM extends far beyond direct exporters.
CBAM Certificate Cost Simulation
With EU ETS carbon prices hovering around €65–75 per ton (as of late 2025) and steel production generating roughly 1.8 tCO₂ per ton of output, the additional cost comes to approximately €117–135 per ton of steel. For an SME exporting 5,000 tons annually to the EU, this translates to an extra €580,000–670,000 (roughly KRW 850–980 million) per year.
Ripple Effects Across the Supply Chain
The demand for emissions data is cascading beyond Tier 1 suppliers to Tier 2 and Tier 3 subcontractors. Since EU importers need accurate embedded emission figures for the entire production chain, SMEs that do not export directly are effectively required to build robust data management systems to meet their customers' reporting obligations.
Step-by-Step CBAM Response Strategy
Step 1: Calculate Embedded Emissions
The first priority is accurately measuring your products' direct emissions (Scope 1) and indirect emissions (Scope 2). While the EU provides default values, these are typically set higher than actual figures, resulting in inflated costs. Measured data-based calculations are key to minimizing your CBAM liability.
Step 2: Establish an MRV Framework
A solid Monitoring, Reporting, and Verification (MRV) system forms the backbone of CBAM compliance.
In Korea, companies can work with KOLAS-accredited verifiers or local offices of EU-recognized verification bodies.
Step 3: Invest in Decarbonization and Green Process Transition
Long-term competitiveness depends on actual emission reductions.
Government Support Programs and KITIM Consulting
The Korean government offers several programs to help SMEs prepare for CBAM.
KITIM provides end-to-end CBAM consulting services, covering everything from embedded emission calculations and MRV system design to government subsidy applications. If your company needs to prepare proactively ahead of full CBAM enforcement, request a free consultation through our [Contact](/contact) page or call us at 02-XXX-XXXX. KITIM will help you build the optimal strategy to maintain your competitive edge in the EU market.