[Trump Tariff Bomb]② "Han Greenhouse Gas Reduction Target Higher Than US" ... Regulation 'Tariffization'

Exclusion from Free Emission Allowance Allocation
Tariff Imposition Possible for U.S. Exporting Companies
Likely Demands for Easing RE100 Regulations
Domestic Companies Concerned About Reverse Discrimination
Risk of Losing Minimum Safety Safeguards

As the possibility grows that the Donald Trump administration in the United States will specifically demand changes in industrial policies such as easing environmental and chemical regulations from the Korean government through tariff pressure, not only domestic industries but also relevant authorities are struggling to respond. In particular, since Korea's Emissions Trading Scheme (K-ETS), RE100 (Renewable Energy 100%) policy, and the Chemical Substances Registration and Evaluation Act (Chemicals Control Act) are expected to be criticized for disadvantaging American companies, proactive regulatory easing measures are also expected to be discussed.

The most representative regulation mentioned by the American Chamber of Commerce in Korea (AmCham) is the high level of greenhouse gas emissions. Korea has set a goal to reduce greenhouse gas emissions by 40% by 2030 compared to 2018, which is higher than the U.S. reduction target (30-35%). U.S. companies argue that such regulations work against their interests.

In particular, regarding the Emissions Trading Scheme (K-ETS), the U.S. side claims that foreign companies are subject to less favorable conditions than domestic companies. For example, steel companies such as Hyundai Steel and POSCO, which have production facilities in Korea, receive a certain portion of free emission allowances from the government. On the other hand, American steel companies like Nucor and US Steel are excluded from free allowance allocation because they do not have production facilities in Korea. Since they have to bear higher carbon emission costs when selling the same steel products in Korea compared to domestic companies, these costs could be imposed as tariffs on Korean companies exporting to the U.S.

The RE100 policy is another area where American companies have raised complaints. U.S. companies adopting RE100, such as Apple, Microsoft (MS), and Tesla, claim that the supply of renewable energy in Korea is insufficient, making it difficult to achieve their targets. In particular, Google and MS need to cover large-scale power consumption for data center operations with renewable energy, but since renewable energy generation in Korea is limited, they have no choice but to use power supplied by Korea Electric Power Corporation (KEPCO). They point out the difficulty of directly purchasing renewable energy through Power Purchase Agreements (PPAs) and demand that the Korean government ease related regulations.

The Chemicals Control Act is also likely to be an area where American companies demand improvements. Global chemical companies such as DuPont, Dow, and 3M point out that the act makes the chemical substance registration process excessively stringent. They especially view the obligation to designate a domestic agent for foreign companies as a burden. For example, American chemical companies entering the Korean market must designate a separate agent to distribute their products and provide confidential information (such as raw material formulations and manufacturing processes) to the government during the registration process. This results in more time and cost to launch products in Korea and raises concerns about corporate confidentiality leaks.

Domestic companies hold the position that the U.S. demands should not be accepted as is. Regarding the Emissions Trading Scheme, domestic companies argue that since they have already invested considerable costs and efforts to meet reduction targets, applying exceptions only to American companies would be unfair. Many also believe that the RE100 policy cannot reflect the demands of a single country alone. Regarding amendments to the Chemicals Control Act, while measures to strengthen corporate confidentiality protection are possible, the obligation to designate an agent should be maintained as a minimum safeguard for consumer and environmental safety.

A chemical industry official said, "RE100 and carbon emission regulations are policies aligned with global trends," adding, "It is realistically difficult for the U.S. to demand easing of these regulations considering the international trade environment." He added, "Especially if exceptions are applied only to American companies, it would be disadvantageous to domestic companies." A steel industry official said, "If demands to remove non-tariff barriers become concrete, it will impose a significant burden on the steel industry as well."

If U.S. pressure materializes, the Korean government may consider partial regulatory easing. Experts advise that to respond to U.S. pressure, it is necessary to strengthen international cooperation, utilize fairness arguments, and appropriately coordinate negotiation cards. It is also necessary to emphasize through cooperation with the EU and Japan that Korea's environmental policies are in harmony with global standards.

The government has also begun to gauge intentions. An official from the Ministry of Environment said, "The Emissions Trading Scheme and others are far more advanced in Europe, and Korea is also moving in line with global trends," pointing out, "Although Korea's standards for imported cars are strict, certain U.S. states have even stricter standards." He added, "At present, rather than issuing individual messages by ministry or product, it is important to understand the true intentions of the U.S.," and said, "We will closely consult mainly with trade authorities to minimize the impact on the national economy."