IEEFA: CBAM Sets Alarms Ringing for South Korean Tech Firms

In its recent report, titled 'Navigating supply chain carbon risks in South Korea', the Institute for Energy Economics and Financial Analysis (IEEFA) draws attention to the fact that global carbon regulation is creating some tough challenges for South Korean companies, particularly those in the semiconductor and AI sectors.

With the possible expansion of the Carbon Border Adjustment Mechanism (CBAM) and stricter expectations around Scope 1, 2 and 3 greenhouse gas (GHG) disclosure, there is a high chance that companies are going to feel the burn financially.

The IEEFA warns that, as sustainability standards tighten worldwide, South Korea could well find itself priced out of major international supply chains unless meaningful progress is made on the deployment renewable energy.

As disclosure standards expand to include Scope 2 and 3 emissions, companies could experience new layers of supply chain carbon exposure.

“The inclusion of indirect GHG emissions, such as Scope 2 and 3, could substantially increase supply chain carbon risks, including investment aversion, higher carbon cost exposure, and counterparty and reputational risks,” says report author Michelle (Chaewon) Kim, the IEEFA’s Energy Finance Specialist, South Korea.

Costs are rising for South Korea's tech exporters

South Korea’s high level of industrial competitiveness could also become a vulnerability.

The IEEFA’s findings show that Samsung Device Solutions recorded Scope 1–3 emissions totalling around 41 million tonnes of CO₂ equivalent in 2024, equating to roughly 539 tCO₂e per USD million in revenue.

SK Hynix demonstrated a lower carbon intensity of 246 tCO₂e per USD million, yet both are far higher than buyers such as Apple (37 tCO₂e) and AWS (107 tCO₂e).

The disparity stems from the more extensive use of renewable energy by global technology leaders. As clean power becomes a prerequisite for supply chain participation, companies operating in countries with limited renewable resources could struggle to compete.

International trade makes up about 70% of South Korea’s GDP, with semiconductors and AI data centres forming core industries.

The IEEFA warns that inadequate access to renewables could erode these advantages, as multinational customers looking to lower their indirect emissions may seek alternative suppliers.

Although semiconductors are not currently included in the EU’s CBAM and Scope 2 and 3 emissions remain outside its remit, the IEEFA cautions that future inclusion could lead to a hike in costs.

The body forecasts that South Korean chip importers might face CBAM certificate expenses of up to US$588m between 2026 and 2034.

“The sharp increase in CBAM costs may prompt European importers to switch their chip suppliers from high-emission South Korean producers to low-carbon suppliers,” warns Michelle.

How South Korean firms could boost their resilience

To preserve its role in global technology supply chains, the IEEFA is urging South Korea to take concerted action that reduces carbon intensity and enhances renewable access. The report makes several recommendations, including:

• Establish a public-private supply chain risk management system which can integrate with national-level trade and company-level financial strategies
• Enhance renewable energy access by accelerating modernisation and grid expansion
• Remove bottlenecks in Power Purchase Agreements (PPAs) and the Renewable Portfolio Standard (RPS) as a means to promote renewable energy procurement
• Address supply chain carbon risks through government-backed funds, tax rebates and low-interest loans
• Buffer carbon pricing impacts by developing domestic ETS markets
• Strengthen international supply chain decarbonisation initiatives in order to meet present regulations

The IEEFA concludes that these initiatives are essential if South Korea is to remain embedded in global supply networks while mitigating the economic fallout from rising carbon costs.