S. Korean steelmakers seek extension of grace period for EU's carbon tax

South Korean steelmakers asked the government Tuesday to persuade the European Union to allow domestic carbon emission calculation methods for a longer period of time ahead of the full implementation of its new carbon border tax.

The EU announced the new carbon-pricing system of the Carbon Border Adjustment Mechanism, which calls for levying an import charge on steel, cement, electricity, fertilizer, aluminum and other related items equivalent to their carbon emissions from production.

The regulation scheme will fully take effect in 2026 after a transition period set to begin in October 2023.

Last week, the European Commission came up with draft rules on its implementation during the transitional phase and published a first call for feedback, under which foreign operators can use methods of their own to calculate embedded emissions of their goods until 2024, rather than following the EU's calculation methods, when they mandatorily submit quarterly reports of the emissions to the EU's executive body.

To discuss responses, South Korea's industry ministry on Tuesday held a meeting with major steelmakers, where the manufacturers welcomed the exception, albeit temporarily, and asked the government to have consultations with the EU to extend such a grace period.

They also called for the EU's elaboration on some rules of the draft with detailed cases and examples, pointing to vague parts, according to the ministry.

"The government will provide official feedback to the EU regarding the draft so as to help minimize any impacts of the regulation on our companies," the ministry said in a release.

The CBAM has been a source of major concern for South Korean steelmakers as it is expected to cost them more and could hurt their competitiveness in the global market.

South Korea is one of the major exporters of steel items to Europe, with its exports of steel and steel products coming to $4.4 billion and $960 million, respectively, last year, according to government data.

The government is working to provide assistance for domestic steelmakers' transition to a low-emission production structure by creating a fund and pushing for various projects to support their research and development of key technologies.

Coal-burning furnaces accounted for nearly 70 percent of the country's total steel production as of last year, and the country seeks to replace coal-fueled blast furnaces with hydrogen-powered ones. (Yonhap)