CRI

 [ABSTRACT]

The European Union's Carbon Border Adjustment Mechanism (CBAM) imposes tariffs on carbon-intensive products imported from non-EU countries, aiming to level the playing field for domestic producers subject to stricter carbon regulations. From 2025, companies will be mandated to report emissions, with additional obligations for emissions verification and the acquisition and submission of CBAM certificates beginning in 2026. This study develops and examines potential response scenarios to CBAM, deriving optimal strategies for adaptation. It specifically assesses the current industry landscape and response strategies of the South Korean government and the local government in Chungcheongbuk-do, alongside case studies from relevant international municipalities.

The initial scenario outlines a market-driven approach without CBAM or environmental regulatory interventions. Using this baseline, the study conducts a partial equilibrium analysis to examine the impacts of incremental regulatory measures, such as CBAM and carbon taxation, on national economies. Comparative analysis of the scenarios reveals optimal response strategies per country. Findings indicate that, in the presence of CBAM, a key strategy for non-EU nations is to implement domestic carbon taxes, effectively reducing reliance on CBAM tariffs while enhancing public welfare through increased tax revenue.

The analysis also reveals that CBAM-targeted items currently show limited alignment with Chungcheongbuk-do's primary exports, implying minimal direct impact on local businesses in the short term. However, CBAM is expected to contribute to global elevation of environmental standards, gradually affecting industries worldwide. While large corporations are relatively well-prepared for these standards due to ESG initiatives, small and medium-sized enterprises (SMEs) may face significant challenges. In particular, SMEs in Chungcheongbuk-do could encounter environmental compliance pressures if international or domestic partners within their value chains impose stringent sustainability requirements.

This study concludes with an overview of international cases, particularly from the UK and US, that illustrate regional government support initiatives for SMEs in achieving carbon emission reductions, providing insights into potential frameworks for Chungcheongbuk-do’s policy response.