Policy Recommendation #1: A modification of the emission monitoring system aimed at accounting for emissions from consumption (rather than production)

Policy Recommendation #2: Prioritize the disbursement of climate finance support to lower middle- and poor-income groups

Policy Recommendation #3: The Korean Government should develop performance driven regulatory frameworks that attract investment in clean energy

Over recent decades, global efforts to combat poverty and inequality has resulted in an increased quality of life for a significant portion of the developing world’s population. The upward social mobility of people from low-income classes to middle-income classes has been accompanied by changes in consumer behavior patterns. As a result, growing consumption of energy-intensive goods is directly contributing to increasing greenhouse gas (GHG) emissions.

South Korea’s energy market is marked by a dominance of fossil fuels, which accounted for 85% of total primary energy supply (TPES) in 2018—relying on energy imports is evident as it accounts for 84% of TPES. The dominance of commercial energy use at 55% of total final consumption ranks as the highest proportion among IEA countries. Korea has the lowest share of clean energy in its energy supply in 2018 (U.S. Energy Information Administration, 2020).

The Korean Government is committed to advancing the country’s energy transformation by growing the share of renewable electricity to 20% by 2030 and to 30-35% by 2040; their plan involves steadily eliminating coal and nuclear from the energy mix, while dramatically enhancing energy quality and by promoting the country’s burgeoning hydrogen industry (Kan, 2020).

In compliance with the Paris Agreement, Korea has pledged to cap its emissions to 536 million tons of carbon dioxide equivalent (MtCO2-eq) by 2030 and to 709 million tons of CO2-eq by 2018 (Korea, 2020). Hitting these strategic objectives would require Korea to greatly intensify decarbonization efforts across all energy sectors, overcome regulatory and structural hurdles, develop versatile market designs, and exploit the country’s advanced technology and creative capabilities. The Government’s launch of a Green New Deal in July 2020 as part of its post-COVID-19 recovery program is a major step towards accelerating Korea’s energy transformation.

In 2019, South Korea was the ninth largest energy consumer in the world. Electronic, semiconductor, and petrochemical exports—mainly to Asian regional trading partners—contribute to the country’s economic development.

Real gross domestic product (GDP) slowed during the two years from 3.1% in 2017 to 2.0% in 2019 (the lowest GDP growth in a decade) as a result of weaker demand for the country’s exports, the slowdown in neighboring China’s economic growth, trade disputes with Japan, and weaker construction investment. The country’s aging population is expected to dampen domestic energy demand and the overall economic landscape over the long term. An economic slowdown caused overall energy consumption in South Korea to decline from 2018 to 2019.⁶ Economic effects from the 2019 novel coronavirus disease (COVID-19) pandemic have adversely affected South Korea’s industrial activity and exports in the first half of 2020 and are projected to stifle 2020’s GDP growth to lower than 2019 levels.

Although petroleum and other liquids, including derivatives of coal and natural gas, accounted for the largest portion (43%) of South Korea’s primary energy consumption in 2019, its share has been declining since the mid-1990s. The steady increase in natural gas, coal, and nuclear energy consumption has reduced oil use in the power sector and the industrial sector. In 2019, the share of nuclear energy consumption rose, while the share of coal consumption fell compared with 2018 levels. Nuclear reactors are beginning to return from extensive maintenance, and the government is restricting some coal-fired generation during winter months to lower air emissions.

The Korean Government is committed to a low-carbon energy transition by reducing the share of coal and nuclear power in the energy mix, expanding the use of renewable energy, enhancing energy quality through the development of demand-side management markets, and promoting the country’s burgeoning hydrogen industry.

The climate change issue and local air pollution has become a social and economic concern in Korea, and the government should draw on a wider public support base for its energy transformation goals in line with the pledge of the world under the Paris Agreement.

The Energy Master Plans (EMPs) describe the national energy strategy of Korea. They are collected every five years, set long-term priorities and provide the basis for sectoral energy strategies. The third EMP was unveiled in 2019 and includes the period from 2019 to 2040 (Ministry of Trade, Industry and Energy of Korea, 2019). It points out five main strategies to promote the vision of “achieving sustainable growth and improving people’s quality of life through energy transition”.

Policy Recommendation #1: A modification of the emission monitoring system aimed at accounting for emissions from consumption (rather than production)

In the context of the 2015 UN Sustainable Development Goals agreement, addressing poverty and inequality is, to some extent, in conflict with the goals of mitigating global climate change. The existing international climate regulation system does not help to overcome this contradiction.

Today, global governance in the field of climate change is based on estimates of the total emissions of countries without taking into account the level of development of countries and the distribution of emissions by income groups within each country. Emissions from production are taken into account, and the consumption-related aspect of emissions is known but not practically taken into account. Meanwhile, GHG consumption and emissions are heavily influenced by income distribution. Emission-control decisions are made at the national level by countries with significant differences in the current development agenda where the tasks of combating climate change are often inferior in priority to those of solving other socioeconomic problems.

A modification of the emission monitoring system should aim at accounting for emissions from consumption (rather than production) in the context of social groups.

The Ministry of the Environment of South Korea is involved in the creation of laws, projects on environmental issues, the establishment of certain standards, and providing support for environmental management at all levels of government. This body consists of several departments involved in the development of innovations such as: an international office, a health office, an office of the quality of natural resources, global environmental affairs, the Water Conservancy Bureau, and the Environment and Resource Recycling Bureau. A large number of bodies allows you to focus on each problem separately, better analyzing the situation. Using the resources of this structure to develop a specific approach to tackle the modification of the emission monitoring system aimed at accounting for emissions from consumption (rather than from production) may help in the efforts to combat climate change.

Policy Recommendation #2: Prioritize the disbursement of climate finance support to lower middle- and poor-income groups

The human influence on the climate system is clear with impacts occurring on all continents and all oceans. Anthropogenic greenhouse gas emissions driven mainly by economic growth and population growth have increased relative to the pre-industrial era and are now more significant than ever. Evidence of human influence on the climate system has increased since the IPCC Fourth Assessment Report (Parry, Canziani, Palutikof, Linde, & Hanson, 2007). Sustainable development and equity provide a framework for assessing climate policy. Limiting the effects of climate change is essential to achieving sustainable development and equity, including poverty eradication. Countries’ past and future contributions to the accumulation of GHGs in the atmosphere are different, and countries face different challenges and circumstances, and have different capacities to address mitigation and adaptation challenges.  Mitigation and adaptation raise issues of equity, equity and objectivity, and they are essential for achieving sustainable development and poverty eradication. Many of the most vulnerable to climate change have made and are making small contributions to GHG emissions.

The introduction of a new system of redistribution of funds to solve the problem of global climate change implies a “penalty” for households with high levels of GHG emissions. Such a system is similar in concept to progressive taxation, however, in contrast to it, it has a targeted character (aimed at financing emission reductions) and can be interpreted not as taxation of high income, but as payment for negative externalities.

In adjusting the criteria for climate finance, priority should be given to projects aimed at reducing the carbon intensity of consumption of social groups that are on the verge of joining the middle class, as well as adapting to climate change among the poorest.

Significant reductions in GHG emissions over the next few decades could significantly reduce the risks of climate change by limiting warming in the second half of the 21^st century and beyond. Cumulative CO₂ emissions largely determine the rise in global mean surface temperature towards the end of the 21^st century and beyond.

Policy Recommendation #3: The Korean Government should develop performance driven regulatory frameworks that attract investment in clean energy

According to a report by the International Energy Agency (Parry, Canziani, Palutikof, Linde, & Hanson, 2007), a key aspect of Korea’s Green New Deal is to reduce industrial carbon dioxide (CO₂) emissions and decouple the sector’s energy consumption from economic activity by maintaining the country’s strong export base. The Korean Government seeks to use the benefits of the Fourth Industrial Revolution to support energy transition and economic development by harnessing the opportunities provided by digitalization. In this context, the Korean Government is advised to develop performance-driven regulatory frameworks for energy efficiency and renewable energy deployment, but also for competitive electricity and gas markets, in order to attract and facilitate investments in clean energy with new business opportunities. By 2022, South Korea is expected to build 28 nuclear reactors and by 2038, this number is expected to be reduced to 14 (Korea Energy Economics Institute, 2020).

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Sources

Parry, M., Canziani, O., Palutikof, J., Linde, P. v., & Hanson, C. (2007). Climate Change 2007: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge: The Intergovernmental Panel on Climate Change.

U.S. Energy Information Administration. (2020). Country Analysis Executive Summary: South Korea. U.S. Energy Information Administration.

Korea, R. o. (2020). Intended Nationally Determined Contribution.

Ministry of Trade, Industry and Energy of Korea. (2019). A New Energy Paradigm for the Future Third Energy Master Plan.

Kan, S. (2020). South Korea’s hydrogen strategy and industrial perspectives. Edito Energie.

Korea Energy Economics Institute. (2020). Retrieved from www.keei.re.kr.

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This post was submitted by Climate Scorecard South Korea country manager Hatyja Nuriyeva