International Energy Agency: "Han, Carbon Costs Reflected in Energy Taxation"

IEA Publishes 'Korea Energy Policy National Report'

In April 2018, Fatih Birol, Executive Director of the International Energy Agency (IEA), speaking at the International Energy Forum (IEF) held in New Delhi, India. (Photo by Reuters)

[Asia Economy Reporter Moon Chaeseok] "The Korean government should ensure that energy taxation on all fuels reflects external costs such as carbon content and air pollution."

As the government announced its goal to achieve carbon neutrality (emissions + absorption = 0) by 2050, the International Energy Agency (IEA) recommended that energy taxation on all fuels should incorporate external costs like carbon content.

To this end, the IEA advised upgrading the Electricity Commission to a regulatory authority. It warned that if the government continues to monopolize major decisions such as pricing, the pace of Korea's energy transition could slow down.

On the 26th, the Ministry of Trade, Industry and Energy announced that Energy Resources Office Director Ju Young-jun would participate via video in the launch event of the "Korea Energy Policy National Report" alongside IEA Executive Director Fatih Birol.

This report is the third edition following those published in 2006 and 2012. It analyzes 10 detailed areas including energy policy and climate change.

An official from the Ministry said, "As this is an in-depth analysis report published by the most authoritative international organization in the energy sector, it is expected to be used as material to widely promote Korea's energy policy to the international community."

The IEA stated in the national report, "We expect Korea to accelerate its energy transition through the Green New Deal strategy while fostering a low-carbon and eco-friendly energy industry."

Executive Director Birol also said, "Expanding renewable energy, improving energy efficiency, and increasing the role of hydrogen can contribute to Korea's energy transition and strengthening energy security. The IEA welcomes and actively supports the Korean government's carbon neutrality goals and Green New Deal strategy."

However, the IEA also pointed out limitations in Korea's energy transition. Specifically, it highlighted ▲the need to introduce a rational taxation system for transportation fuels ▲the structure where electricity wholesale and retail prices are set by the government rather than the market ▲the lack of an independent regulatory authority separate from the government ▲the Electricity Commission’s role being limited to advisory functions while the government makes all major decisions ▲and the low level of openness in the power sector, making genuine competition difficult. The IEA stated, "(These factors) could be major obstacles hindering Korea's energy transition."

The IEA recommended ▲upgrading the Electricity Commission to a regulatory authority to strengthen tariff setting and market oversight roles ▲developing a performance-driven regulatory system for electricity and gas markets alongside promoting energy efficiency and renewable energy ▲reflecting external costs such as carbon content and air pollution in energy taxation on all fuels ▲and building infrastructure for clean mobility.

The IEA advised, "Efforts should be made to improve energy efficiency in a multifaceted way not only in the power sector but also in the industrial and transportation sectors. In particular, for the industrial sector, it is important to find the optimal balance between imposing mandatory energy efficiency improvements and encouraging voluntary reduction efforts by companies."

Director Ju said, "The Korean government plans to faithfully utilize the IEA's policy evaluations and recommendations when establishing future energy policies," adding, "We hope that the Korean policy cases included in the national report will serve as a reference for policy formulation in IEA member countries."

This content was produced with the assistance of AI translation services.