Navigating Carbon Costs: Small Businesses in South Korea Face New EU Export Challenges

The Ministry of SMEs and Startups held an EU Carbon Border Adjustment Mechanism (CBAM) Response SME Support Plan Announcement Meeting at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, on the 22nd.

The CBAM, which has been on a trial run since last October, is a system that requires the purchase of certificates corresponding to the amount of carbon emitted during the production process when exporting carbon-intensive products (steel, aluminum, fertilizers, hydrogen, cement, and electricity) to the European Union (EU). After about a two-year transition period until next year, it will be fully implemented in 2026.

The Support Measures for SMEs to Respond to CBAM announced by the Ministry of SMEs and Startups focuses on enabling small and medium-sized enterprises (SMEs) that export to the EU to effectively respond to the Carbon Border Adjustment Mechanism (CBAM). This is achieved by analyzing the export scale, industry, items, and other factors relevant to SMEs subject to CBAM and EU requirements. The key content of the support measures includes utilizing three projects to assist SMEs in measuring and calculating their carbon emissions at the product unit level, issuing verification reports using EU-ETS verification bodies, and supporting the carbon emissions calculation and verification process. These efforts are mainly targeted at SMEs with an export scale above a certain level (355 companies with exports of over KRW 1 billion last year, accounting for 98.3% of SMEs’ exports to the EU).

For all SMEs exporting to the EU (1,358 companies as of last year), specialized CBAM courses will be offered through education and training programs to prepare them for the CBAM system. These courses will include methods for measuring and calculating carbon emissions. Additionally, a joint task force (TF) involving relevant ministries will continuously operate joint briefings and a helpdesk to explain the CBAM system and address inquiries about calculating carbon emissions.

To reduce the cost burden associated with measuring and calculating the emissions of SMEs, a digital measurement, reporting, and verification (MRV) solution will be developed and distributed. This will be accompanied by support for implementing carbon reduction facilities and providing carbon emission management software (SW) annually to companies that have received direct support, such as one-on-one carbon neutrality consulting.

In addition, they will expand support for additional guarantees for the expected carbon reduction amount and policy fund loans for the introduction and operation of large-scale carbon neutrality facilities.

The ministry also plans to build a dedicated platform that comprehensively provides information related to carbon neutrality, such as global carbon regulation trends and support projects. They will also ensure that the opinions of SMEs, such as reducing the burden of measuring and verifying emissions, are reflected in national-level carbon regulation discussions, such as EU trade negotiations and high-level talks. They will promote the enactment of the (tentative) SME Carbon Neutrality Promotion Act to support voluntary carbon reduction by SMEs.

SMEs attending the meeting suggested, “It is difficult to obtain carbon emission information from overseas raw material suppliers such as China and Japan,” and “Cost support for calculating and verifying carbon emissions and support for training and education courses for carbon emission calculation professionals for SMEs without professionals is necessary in the process of responding to CBAM.” Experts who attended the meeting said, “This support plan is timely in that it prepares proactive responses during the transition period before the full implementation of the EU CBAM system and supplements policies. It is expected that our SMEs will effectively respond to global carbon regulations, including CBAM.”

Minister of SMEs and Startups Oh Young Ju shared, “Global carbon neutrality is an unstoppable flow and will become a key issue that companies must respond to for survival and growth. I hope that companies will recognize this trend as an opportunity for growth and actively respond to it together with the government.”