CBAM Response Strategy, BK S&P's Staff Reveal the Secrets
💬 “We're trying to supply products to a German buyer, but we've hit a major obstacle because of CBAM. It's challenging even to understand what exactly needs to be prepared from A to Z.”
This is a common difficulty faced by many South Korean companies when first encountering the Carbon Border Adjustment Mechanism (CBAM).
The European Union (EU) implements this system to prevent carbon leakage and promote global decarbonization, aiming for fair global carbon regulation. However, from the perspective of export companies, they face the dual challenge of responding to this while maintaining price competitiveness and business viability.
This article offers practical guidance based on specific and effective response strategies suggested by BK S&P's field staff, providing a realistic direction for CBAM responses.
🚩 Where Did This Problem Begin?
CBAM is a carbon-related adjustment cost imposed by the EU on imported products with high carbon emissions.
Starting January 1, 2026, actual costs will be applied to steel, aluminum, cement, fertilizers, electricity, and hydrogen.
There is a possibility of expansion to plastics, organic chemicals, etc., requiring proactive corporate actions.
This system goes beyond a mere cost issue, acting as a regulatory mechanism to drive low-carbon transitions across industries,
and can directly impact export strategies and long-term business competitiveness.
Carbon Border Adjustment Mechanism (What is it?)
CBAM is designed to prevent high-carbon products, produced in countries with relatively lax regulations, from gaining price advantages in the EU market.
If a company's products fall within CBAM's scope, it must report not only direct emissions generated during production but also indirect emissions from energy use in manufacturing to the EU Commission quarterly.
🤔 Important Points to Note Here
To systematically respond to CBAM, consider these critical factors:
Affected by EU ETS Market Prices:
CBAM's cost calculation is adjusted in real-time according to the EU's Emissions Trading System (ETS) market prices.
Hence, predicting the cost burden is difficult, and risk management for market price volatility is essential.Complexity in Calculating Carbon Emissions:
It's not just about simple calculations; material and process-specific analyses are needed,
requiring systematic and quantitative data collection for accurate reporting, including indirect emissions.Supply Chain Emission Data Transparency:
Gathering and verifying carbon emission data across the supply chain is becoming mandatory.
Establish systems ensuring data reliability, consistency, and traceability.
To address these complex factors, individual companies must fully understand CBAM's requirements and establish actionable strategies through a prepared internal framework.
🧩 CBAM Has Evolved This Way
CBAM is not simply a tax or import regulation.
It's a key initiative for expanding the EU's Emissions Trading System (ETS) strengthening within Europe globally,
gaining international attention as a means to prevent carbon leakage due to regulatory differences across nations.
Thus, for companies, it should be seen not only as overcoming trade barriers but also as an opportunity to establish a transparent, sustainable environmental management system, marking the core of CBAM responses.
Initial Response Cases in the Industry
Some European and Japanese companies have proactively responded to CBAM by incorporating low-carbon production facilities early on,
systematically managing energy use and carbon data across their supply chains.
For domestic companies too, forming long-term decarbonization strategies rather than short-term evasions is crucial for maintaining international competitiveness.
Soon, we'll delve into more detailed CBAM response measures recommended by BK S&P's staff,
covering corporate preparation and practical issues with solutions to real-world scenarios.
Part 2 will specifically introduce the actual response strategies and case studies.
🛠️ CBAM Response Strategy Extracted from Practice, How to Begin?
CBAM response extends beyond simple regulatory compliance,
serving as a key strategy to enhance corporate sustainability and international competitiveness amidst environmental regulation.
What preparations are taking place in the real field?
Practical Tips: Getting Started with Preparation
1. Enhancing the Accuracy of Direct Emission Calculation
Technology Adoption
Automated emission measurement systems reduce manual error possibilities and improve data precision.
Smart sensors or IoT-based monitoring technology enable real-time management,
contributing not only to regulatory compliance but also to cost savings.Accurate Data Collection
Since carbon emissions occur across diverse corporate production processes,
apply clear and consistent criteria from the collection stage,
along with data integration into existing ERP or MES systems.
2. Indirect Emissions (Power Usage) Management
Adopting Green Power
Introducing renewable energy can significantly reduce indirect emissions from power usage.
Some small and medium manufacturers use solar, wind, and other self-generated facilities,
providing long-term benefits in cost and emission reduction.Energy Management Solution Adoption
Smart power management solutions are useful for usage analysis, peak control, and energy-saving plan establishment.
They can also serve as a foundation for securing operational efficiency along with emission reduction.
3. Setting Up a Supply Chain Carbon Emission Information Management System
Transparent Collaboration with Suppliers
For securing the reliability of required emission data from suppliers,
establish clear data provision standards and collaboration protocols.Utilizing Digital Platforms
Digital infrastructure to track the entire supply chain is central to CBAM response.
Approaches utilizing big data or blockchain technology are being considered,
offering long-term benefits in transparency and audit response.
4. Strengthening Cooperation with EU Local Partners
Developing Local Partnerships
Issues related to local administrative procedures or certifications during CBAM compliance
can be overcome through partnerships with distribution partners or specialized institutions within the EU.Establishing an Information Sharing System
Create a collaborative network to reduce policy shifts and interpretation misunderstandings, allowing for rapid sharing of response directions.
Exchanging real-time information enhances adaptability to regulations.
👥 Experience Makes a Clear Difference
Preparing for CBAM is not a one-time project,
but a long-term task requiring a reassessment of the entire corporate strategy.
An active response, rather than a passive attitude, determines success.
Real Feedback from Practitioners
"Data management was complex at first, but we efficiently transitioned through carbon emission monitoring systems."
(Environment Management Manager at a Medium-sized Manufacturing Company)"There was an initial investment burden when adopting renewable energy,
but in the long run, we experienced flexible power usage and cost stabilization benefits."
(Energy Management Manager at an Automotive Parts Supplier)"By closely collaborating with our European local partners, we could swiftly organize CBAM response materials."
(Overseas Sales Team at a Chemical Product Export Company)
This practical field feedback indicates that responding to CBAM is not just a marketing element,
but a strategic approach that determines competitiveness.
💬 Answering Questions Readers Might Have
Now we'll address the key questions frequently raised in the field with explanations.
"Are there other regulations I should know about besides the Carbon Border Adjustment Mechanism?"
Apart from CBAM, major countries like the US, Canada, Japan, and China are
strengthening their domestic carbon regulations or applying environmental standards to imported products.
In particular, the US is bolstering linked policies such as clean energy tax support and domestic-first energy use standards.
"Where should I start with carbon emission certification?"
Domestically, institutions under the Ministry of Environment or projects linked to the Ministry of Trade, Industry and Energy support the certification process.
Understanding and utilizing international certification systems (like ISO 14064) to meet EU certification requirements is also needed.
"How can I reduce CBAM costs?"
CBAM burden costs can be partly reduced by demonstrating domestic greenhouse gas reduction activities and institutional measures.
Reducing emissions themselves or having a transparent reporting system can provide distinctive response capabilities.
"Why is calculating carbon emissions so complex?"
Because it’s crucial to fulfill defined calculation standards with clear data analyzed by each process,
considering direct emissions (Scope 1), indirect emissions (Scope 2), and potentially supply chain inclusive emissions (Scope 3).
"The initial cost of preparing for CBAM is burdensome. What should I do?"
For small and medium-sized enterprises, government support programs (e.g., greenhouse gas diagnostics, CBAM response consulting) are being operated,
and utilizing overseas regulation response support programs from related organizations like the Korean International Trade Association or KOTRA is a good approach.
Based on these Q&As, more specific CBAM response strategies will continue in Part 2.
Your awareness and questions are critical starting points for the development of the industrial ecosystem in the carbon-neutral era.
The Carbon Border Adjustment Mechanism is a core issue requiring strategic approaches beyond regulation, for sustainable corporate growth.
To systematically establish CBAM response plans, reliable practical experiences and industry expertise must support them.
For CBAM-related consulting or detailed response strategies,
please contact BK S&P.
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