[Q&A] Hong Nam-gi: "Will comprehensively review and decide policy on carbon tax introduction and diesel tax increase in the future"

'2050 Carbon Neutrality Promotion Strategy' Joint Briefing

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki is delivering opening remarks at the joint briefing on the '2050 Carbon Neutrality Promotion Strategy' held on the 7th at the Government Seoul Office in Gwanghwamun, Seoul. From left, Minister of Trade, Industry and Energy Sung Yun-mo, Deputy Prime Minister Hong, and Minister of Environment Cho Myung-rae.

[Sejong=Asia Economy Reporter Ju Sang-don] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated, "Carbon tax will be comprehensively reviewed and policies decided because it has multifaceted impacts not only on climate change response for the environment but also on income distribution, prices, and industrial competitiveness."

On this day, Deputy Prime Minister Hong said at the '2050 Carbon Neutrality Promotion Strategy Joint Briefing' held at the Government Seoul Office, "It is not appropriate to specifically discuss the introduction of a carbon tax or the increase of diesel tax at this stage."

Hong explained, "The content announced today includes a major strategy and direction to 'review the overall tax and levy system to strengthen the carbon price signal.' At this stage, specific issues like these are tasks that need to be further reviewed in the future."

The following are the main points from the Q&A session with Deputy Prime Minister Hong Nam-ki, Minister of Environment Cho Myung-rae, Minister of Trade, Industry and Energy Sung Yun-mo, and the press corps.

- What is the target timeline and scale for establishing the climate response fund?

▲ Hong Nam-ki: The government is certain about establishing a climate response fund. However, there must be a legal basis. We are also reviewing how to support revenue and expenditures. Currently, the Green New Deal Basic Act has been proposed to the National Assembly. It is a member's bill that provides the legal basis for establishing a climate response fund, so the legal foundation is underway. We plan to conduct more detailed reviews on what specific resources will be used and which projects the expenditures will target. It is expected that the main revenue source will be created through the restructuring of eco-friendly energy taxes.

- You mentioned using green hydrogen as a core fuel in fostering new promising industries. What are the specific plans, and could you explain what the goal of over 80% by 2050 mentioned in the materials precisely means?

▲ Hong Nam-ki: Currently, green hydrogen is only at a small-scale demonstration stage, and there is almost no practical production or utilization. In fact, nearly 100% of hydrogen comes from gray hydrogen produced in industrial processes. The government announced today that by 2050, more than 80% of total hydrogen production will be green hydrogen generated from renewable energy production processes, not gray hydrogen. The government’s future tasks include technology development for green hydrogen, liquefied hydrogen technology development, and strengthening the entire hydrogen distribution infrastructure.

- To provide a carbon reduction signal through carbon pricing, an increase in carbon prices seems inevitable. Specifically, what kind of levy enhancements are being considered? Will the auctioned allocation ratio in the emissions trading scheme also be expanded?

▲ Cho Myung-rae: The Ministry of Economy and Finance will continue to consider the introduction of carbon price taxation. At this point, it is only about setting the basic strategic direction and considering institutional foundations related to carbon price signals to promote the 3+1 strategy mentioned earlier, especially through taxation. Since there are existing energy and environmental taxes, the Ministry of Economy and Finance will thoroughly review overlaps and consider establishing a separate carbon-related signal tax. Regarding the Ministry of Environment’s role in 'how to handle auctioned allocations in the future,' the allocation plan for the third phase has already been confirmed, and the auctioned allocation ratio has been raised this time. There are plans to continue increasing it. Additionally, the emissions trading scheme includes benchmarking methods that consider technological levels, which can also reduce greenhouse gas emissions. These will be comprehensively considered and reflected in the '2050 Net Zero (Carbon Neutrality) Strategy.'

- You mentioned establishing a Carbon Neutrality Committee, but isn’t the National Climate and Environment Council already performing a somewhat similar role? Will there be overlap in expert groups, and will the National Climate and Environment Council focus solely on fine dust issues in the future?

▲ Cho Myung-rae: The government is reviewing how to consolidate the existing three to four committees, including the National Climate and Environment Council, the Green Growth Committee, the Special Committee on Fine Dust, and the Sustainable Development Committee, into a Carbon Neutrality Committee to achieve the 2050 goal. While the broad direction has been set, the specific plan for consolidating these three to four committees into one will likely be developed next year, with institutional measures considered by the end of the year. During this transitional period, the existing Green Growth Committee task force under the Office for Government Policy Coordination will lead the review and process of consolidating the committees.

▲ Hong Nam-ki: Regarding the auctioned allocation ratio in the emissions trading scheme, it has already been raised from the current 3% to 10% in the allocation plan from 2021 to 2025. Whether to further increase this ratio will be reviewed as needed during the operation of the 10% auctioned allocation ratio.

- The 9th Basic Plan for Electricity Supply and Demand being prepared by the Ministry of Trade, Industry and Energy does not include carbon neutrality goals. Will carbon neutrality-related content be reflected in the final plan?

▲ Sung Yun-mo: The 9th Basic Plan for Electricity Supply and Demand currently being prepared includes a bold plan to reduce coal-fired power plants by half, from 60 units to 30 units by 2034. This is expected to lay the foundation for a power mix aimed at carbon neutrality by 2050. Regarding the medium- to long-term power mix for achieving carbon neutrality by 2050, we plan to review and present it next year, considering the legislation of related laws, alignment with higher-level plans, and other circumstances.

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