Starting next year, as the government plans to impose a carbon border tax in Europe, it will pursue a 'two-track' approach to establish low-carbon steel standards. The government aims to actively participate in the development of international low-carbon steel standards, reflecting the opinions of our industrial sector, while also planning to establish realistic low-carbon steel standards domestically.
According to the Ministry of Trade, Industry and Energy and the Ministry of Environment, on the 30th, the 'Climate Club,' a multilateral consultative body comprising 42 countries, is discussing low-carbon steel standards to establish international criteria for carbon emission reduction and trade. This aims to categorize 'low-carbon steel' grades based on carbon emissions generated during steel production, similar to how the 'clean hydrogen certification grade' differentiates based on carbon emissions produced when making 1 kg of hydrogen.
Our government plans to cooperate with the Climate Club to participate in the establishment of international low-carbon standards, and also set domestic low-carbon standards. Considering that the domestic steel industry is inherently likely to emit more carbon than other countries, the plan is to enact realistic low-carbon steel standards. Furthermore, it is essential that these domestic standards are recognized by the international community.
A government official noted, 'As interest in low-carbon steel rises globally, international discussions are becoming more active.' They explained, 'We are looking for ways the government can support low-carbon steel until we can create hydrogen reduction steelmaking, which does not emit carbon at all, by establishing low-carbon steel standards through a two-track approach.'
◇ 'With Trump tariffs and the EU carbon border tax... the steel industry is paying attention to low carbon'
The government's increased focus on low-carbon steel stems from the fact that the steel industry is among those with high carbon emissions. According to the ESG Network, South Korea's steel industry accounts for about 15% of the country's greenhouse gas emissions.
Looking at the production methods, the blast furnace method accounts for 67% of total production but is known to emit 2.3 tons of carbon dioxide when producing 1 ton of steel. The remaining 33% is produced via the electric arc furnace method, but it is not free from carbon emissions as it is generated through fossil fuel-based electricity.
There are next-generation technologies, such as 'hydrogen reduction steelmaking,' that can dramatically reduce or completely eliminate carbon dioxide emissions during steel production, but developing them is challenging. It is projected that the hydrogen reduction steelmaking technology currently undergoing preliminary feasibility studies will not be commercialized in South Korea until 2035.
The steel industry is trying to reduce carbon emissions by adding scrap metal into electric arc furnaces or injecting hydrogen-containing gas into blast furnaces. However, as carbon reduction efforts have been slow, carbon emission bills amounting to hundreds of billions of won are looming.
The European Union (EU) will implement the Carbon Border Adjustment Mechanism (CBAM) starting in 2026. This system requires importers of goods without reflected carbon costs to purchase CBAM certificates equivalent to the carbon costs of EU-produced products. Kim Jong-gap, former president of the Korea Electric Power Corporation, said, 'The carbon border adjustment system (carbon border tax) will pose a greater threat to us than the Trump tariffs.'
According to the Korea Chamber of Commerce and Industry, the costs that South Korea's steel sector will bear post-CBAM introduction are expected to increase from 85.1 billion won in 2026 to 550 billion won by 2034. KORCHAM stated, 'The production inducement amount through steel product exports is approximately 101 trillion won, and the value-added inducement amount is about 22 trillion won,' and warned that if the cost burden on the steel industry intensifies and production activities decline, it could negatively affect the entire service sector and value creation.
Protectionist policies in major countries are also threatening the domestic steel industry. Since December 12, the United States has begun imposing a 25% tariff on steel and aluminum imported from around the world. In response, the EU has decided to cut steel imports by up to 15% starting next month, and India is also considering introducing a 12% tariff.
The issue is that the countries imposing protectionist barriers are major export markets for South Korean steel. According to the steel industry, last year's top exporter of South Korean steel was the EU (3.81 million tons), followed by Japan (3.67 million tons), India (3.05 million tons), and the United States (2.76 million tons).
A steel industry official stated, 'Amid deepening protectionism, we believe we should focus on new markets such as low-carbon and high-value steel products rather than engaging in price and volume competition,' adding, 'Government policies and support are necessary for this.'
Minister of Trade, Industry and Energy Ahn Duk-geun also said at a meeting held on the 12th, 'Considering the high uncertainty, I ask the industry to proactively review investment and export strategies focused on high-value products,' and added, 'The government will also focus on supporting this direction.'
The government intends to focus on the low-carbon steel market while discussing mid- to long-term development plans through the 'Public-Private Joint Task Force to Strengthen Competitiveness in the Steel Industry,' which launched in January. Plans include establishing a foundation suitable for new markets such as research and development, personnel, and scrap metal.
A Ministry of Trade, Industry and Energy official stated, 'Through research services, we will derive measures for low-carbon steel standards and expanding demand, and we plan to establish a 'Blueprint for the Advancement of the Steel Industry' by the end of this year.