"EU·US Carbon Border Tax Introduction to Reduce South Korea Exports by 1.1%"

[Asia Economy Reporter Jang Sehee] An analysis has emerged that if the European Union (EU) and the United States impose a carbon border tax, South Korea's exports could decrease by more than 1%.

According to the report titled 'The Impact of Major Countries' Climate Change Response Policies on Our Exports' released by the Bank of Korea on the 29th, the EU is promoting the introduction of a carbon border tax (to be introduced in 2023 and imposed in 2026) that charges importers based on the carbon emissions generated during the production process of imported goods, and the United States is also considering its introduction.

If the EU imposes a carbon border tax of $50 per ton (t) of carbon emissions as expected, South Korea's exports are analyzed to decrease by 0.5% annually (approximately $3.2 billion). Furthermore, if the United States imposes the same level of carbon border tax, exports are expected to shrink by an additional 0.6% (approximately $3.9 billion), resulting in a total export reduction rate of 1.1%.

This is because the introduction of the carbon border tax will reduce the price competitiveness of Korean export products and decrease intermediate goods exports to countries such as China, which are expected to be significantly affected by the carbon border tax.

By industry, sectors with high carbon intensity and large export shares such as transportation equipment (automobiles and ships, 0.16%↓ when imposed by the EU, 0.15%↓ when imposed by the US), metal products (steel, 0.10%↓, 0.13%↓), and chemical products (synthetic resins and pharmaceuticals, 0.10%↓, 0.09%↓) are expected to be relatively more impacted.

The Bank of Korea also notes that due to the reduction in intermediate goods exports to China, negative effects on electrical and electronic products such as semiconductors (0.10%↓, 0.13%↓) are inevitable.

Meanwhile, since Korean companies are already bearing a carbon price in Korea (assumed at $15 per ton), if the EU and the US consider this and reduce the carbon border tax to around $35 per ton, the export reduction rates due to the EU and US carbon border tax introduction are estimated to decrease to 0.3% and 0.4%, respectively.

The Bank of Korea emphasized, "It is necessary to prepare short-term response measures by companies and the government to minimize the negative impact of the carbon border tax on our economy."