South Korean Government Intervenes in Litigation on Its Cap-and-Trade Program

The Korean government filed a brief in defense of a South Korean steel exporter and plaintiff July 12, adding its own opinion directly to a case discussing the long-standing controversy surrounding the Commerce Department’s finding of de jure specificity in the Korean steel industry’s use of Korea’s cap-and-trade emissions program (see 2406200062) (POSCO v. U.S., CIT # 24-00006).

The foreign government also pushed back against the department's finding of de facto specificity and holding it had supplied exporter POSCO with electricity for less-than-adequate remuneration.

Commerce’s de jure specificity finding regarding the cap-and-trade program, the Korean Emissions Trading System, or K-ETS, has been struck down multiple times by the Court of International Trade, the South Korean government said. It said that it was not forgoing revenue by granting more emissions permits (called Korea Allowance Units, or KAUs) to certain companies; in the absence of those permits, those companies wouldn’t necessarily turn to the Korean government over another private company to purchase more, it said again.

It also pointed out that, rather than serving as a benefit, the program imposes an additional cost on Korean companies, as they must invest in preventing excess carbon emissions or pay a penalty.

“Even with the additional KAUs … most companies suffered a significant financial burden in complying with the K-ETS program,” it said.

And the department’s de facto specificity finding for the Korean steel industry’s use of an electricity subsidy was equally unsupported, the South Korean government said. First, it said, Commerce had “arbitrarily” grouped the steel industry with two other, unrelated ones -- other than the fact that they were the other two largest users of electricity -- to argue that their use of the subsidy constituted specificity.

Not only was there no clear reason for the grouping, but “disparate” is also not the same thing as “disproportionate” use of a subsidy, the government said, as CIT held in the case Bethlehem Steel Corp. v. United States.

Plus, the total amount of electricity used by the three industries combined was still less than 51%, it said -- a figure that Commerce said in Bethlehem, and the court upheld, didn’t represent de facto specificity of a subsidy.