Carbon Border Adjustment Mechanisms, Carbon Pricing Policy, and the Inflation Reduction Act

By Alistair Ritchie and Yi Chen

As Korea seeks to achieve a 40% reduction in greenhouse gas (GHG) emissions from 2018 levels by 2030 to meet its Nationally Determined Contribution (NDC) under the Paris Agreement, significant climate policy developments are taking place in the European Union (EU) and United States (U.S.). The EU Emissions Trading System (EU ETS) continues to advance and is aiming to achieve a 62% reduction in GHG emissions from 2005 levels by 2030, in combination with implementation of the EU Carbon Border Adjustment Mechanism (CBAM). The United States is actively considering its own CBAM policy and has triggered massive investment in clean energy technology through the Inflation Reduction Act (IRA).

The Asia Society Policy Institute (ASPI), with the generous support of the Korea Foundation, organized a study tour to the EU and the U.S. in which seven young Korean leaders in climate and energy policy participated in meetings and networking events in July 2023. The project was aimed at equipping the participants with knowledge, insights, and networks to understand the implications of EU and U.S. policies related to ETS, CBAM, and broader climate and energy policies, and to help them in developing strategies to align its K-ETS with more ambitious emission targets, comply with EU's CBAM, and implement emission reduction technologies to meet its NDC and net zero goals.

This summary report presents key learning points from the study tour to support Korea in achieving its GHG emission targets and responding to evolving trends in EU and U.S. climate policies.