Raising Climate Response Fund to Pursue 'Carbon Neutrality'... Accelerating Review of Carbon Tax Introduction (Comprehensive)

Deputy Prime Minister: "Not Appropriate to Discuss Introduction at This Time"
"Will Thoroughly Review Impact on Income Distribution, Prices, and Industrial Competitiveness"

Sung Yun-mo, Minister of Trade, Industry and Energy, is holding a joint briefing on the 'Government 2050 Carbon Neutrality Promotion Strategy' at the briefing room of the Government Seoul Office in Jongno-gu, Seoul, on the morning of the 7th. Photo by Kang Jin-hyung aymsdream@

[Sejong=Asia Economy reporters Kim Hyunjung and Joo Sangdon] The government plans to introduce a de facto carbon tax to reduce greenhouse gas emissions and use the revenue to establish a 'Climate Response Fund (tentative name).' The fund will be used not only for carbon-neutral investments and expenditures but also to support industries, regions, and workers affected by a just transition. However, to specifically review related tax rates and other pricing mechanisms such as charges and emissions trading systems, the government intends to start related research projects next year. If the carbon tax is implemented rapidly in the short term, concerns arise about increased burdens on related companies, weakening industrial competitiveness, and the increased financial strain on low-income households due to various price hikes.

On the morning of the 7th, the government announced the '2050 Carbon Neutrality Promotion Strategy' at the Seoul Government Complex. The policy directions for achieving carbon neutrality include ▲decarbonizing the economic structure ▲creating a low-carbon industrial ecosystem ▲a just transition to a carbon-neutral society, along with ▲strengthening the institutional foundation for carbon neutrality, collectively called the '3+1 strategy.' First, the government will improve fiscal systems to ensure mechanisms that suppress carbon emissions operate during the management of revenues and expenditures. Establishing the Climate Response Fund is key, with relevant ministries negotiating the consolidation of existing special accounts and funds of similar nature, securing fund revenue sources, and preparing detailed operational plans. Through research projects, the government will comprehensively review tax systems, charges, and emissions trading systems that can price carbon, thereby restructuring the carbon pricing system. This points to the anticipated introduction of a de facto 'carbon tax.'

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is holding a joint briefing on the 'Government 2050 Carbon Neutrality Promotion Strategy' at the briefing room of the Government Seoul Office in Jongno-gu, Seoul, on the morning of the 7th. Photo by Kang Jin-hyung aymsdream@

However, Deputy Prime Minister and Minister of Economy and Finance Hong Namki stated, "It is not appropriate at this stage to discuss the introduction of a carbon tax or an increase in diesel tax," adding, "Regarding the carbon tax, we will comprehensively review its impacts on climate change response, income distribution, prices, and industrial competitiveness before deciding on a policy." This is interpreted as an intention to consider issues raised in the market, such as the regressive nature of related tax systems that could increase burdens on low-income households due to rapid implementation of the carbon tax, which could also weaken industrial competitiveness due to increased burdens on related companies and various price hikes.

In the mid to long term, the government will introduce fiscal systems that consider the environmental and economic value of carbon, such as the carbon-aware budgeting system, which evaluates how government projects impact carbon reduction and reflects the results in budget proposals and settlements. Additional secured resources will be increasingly allocated to investments in carbon neutrality or to support industries, regions, and workers affected by the transition to carbon neutrality.

Support for policy finance to foster the green sector will also be expanded. The government has set a goal to increase the share of green sector funding by policy financial institutions from the current 6.5% to about 13% by 2030, doubling the current level. Using a 20 trillion won scale policy-type New Deal Fund as seed money, the plan is to strengthen the leading roles of key institutions to induce the expansion of green investments from market funds. Additionally, to support companies' transition to low-carbon industrial structures, programs supporting green transition companies such as 'RE100' (Renewable Energy 100 ? a global campaign where companies commit to using 100% renewable energy for their electricity needs) will be utilized. To establish criteria for green finance decisions, a green taxonomy will be developed, and companies' environmental disclosure obligations will be strengthened. Alongside this, core technologies for carbon neutrality such as carbon capture, utilization, and storage (CCUS) technology and energy efficiency will receive focused support.

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