Government Accelerates Carbon Neutrality, Industry in Crisis... 'Fair Transition' Is Key

Strengthening 'Low-Carbon Drive' Across All Economic Sectors
Keeping Pace with International Trends in Climate Change Response
Focused Development of Renewable and Eco-Friendly Technologies and Industries
"Zombie Venture" Concerns Arise... Promotion of the 'Green New Deal Act'

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

[Asia Economy Reporters: Park Soyeon, Kim Bokyung, Moon Chaeseok] According to the '2050 Carbon Neutrality Promotion Strategy' announced on the 7th, the government is expected to strongly accelerate policy measures to decarbonize all areas of the economic structure, including power generation, industry, and transportation. The government’s announcement materials on that day mentioned the word 'acceleration' more than 10 times. This reflects the judgment that global regulations are tightening, with the United States and the European Union (EU) actively discussing carbon border taxes, making changes to respond to this new international economic order inevitable. The goal is to simultaneously promote economic growth and improve quality of life while transitioning to a carbon-neutral society.

However, the sudden industrial restructuring has put the industry on high alert. Whether a 'just transition' that minimizes damage to existing industries and jobs, such as internal combustion engine vehicles and coal-fired power generation, can be achieved is expected to be the biggest issue in carbon neutrality.

◆ Distribution of electric vehicle chargers to 20 million households... fostering low-carbon technologies and industries = First, the transition will be made from fossil fuel-centered power generation to renewable energy. Along with this, renewable energy hydrogen and energy IT will be fostered as three major new energy industries. The plan is to secure next-generation technologies that will lead the renewable energy industry ecosystem, such as achieving 35% solar cell efficiency, ultra-large turbines (12 MW), floating wind power, and building-integrated photovoltaics.

In the manufacturing sector, greenhouse gas emissions will be reduced by utilizing CCUS (Carbon Capture, Utilization, and Storage) and green hydrogen technologies, and low-carbon production processes will be induced through smart factories, green industrial complexes, and digital transformation. The government will increase the distribution of eco-friendly vehicles such as hydrogen and electric vehicles that can replace internal combustion engine vehicles, and promote eco-friendliness across mobility sectors including public transportation, railroads, and ships. The government plans to distribute electric vehicle chargers to 20 million households nationwide and establish about 2,000 hydrogen charging stations in urban and key locations.

Additionally, the government announced plans to enter the global market and increase jobs by making low-carbon industries such as secondary batteries, bio, and green hydrogen new growth engines. It will strengthen financial and policy support to nurture ventures and startups with promising low-carbon technologies into innovative companies, while expanding regulatory free zones in the eco-friendly sector.

Minister of Environment Cho Myung-rae is delivering the opening remarks at the Green New Deal (Eco-friendly Future Vehicles and Green Industry Sector) investment briefing held on the 26th at the Industrial Bank of Korea IR Center in Yeouido, Yeongdeungpo-gu, Seoul. This briefing, jointly hosted by the Ministry of Environment, the Financial Services Commission, and the Ministry of Economy and Finance, provided explanations on the key policy directions for eco-friendly future vehicles such as electric and hydrogen cars, which are core areas of the Green New Deal, as well as the green industry sector, and the green finance promotion plan as a foundation to facilitate these initiatives. Photo by Kim Hyun-min kimhyun81@

◆ Increased burden on industry... "Efforts for a just transition are necessary" = The government has decided to establish a climate response fund to provide financial support for the transition to a carbon-neutral society. The fund’s resources will be raised through taxes, charges, and emissions trading schemes. Ultimately, the burden on companies is expected to increase.

Korea’s coal power generation accounts for about 40%, which is higher than major advanced countries, indicating a high dependence on fossil fuels. The manufacturing sector driving economic growth is also centered on high carbon-emitting industries such as steel and petrochemicals, so the burden on the industry is expected to increase during the decarbonization process. As the carbon-centered existing industrial structure rapidly collapses, side effects such as a chain of bankruptcies among companies unable to adapt to the changing environment, job losses, and a slowdown in economic growth are also anticipated.

The industry is concerned that if the government accelerates the industrial restructuring too quickly or sets overly ambitious targets, it could lead to weakened industrial competitiveness and increased household burdens. A refining industry official said, "If a country with carbon-centric industries sets the carbon neutrality target too high, the burden on companies and citizens becomes too great," adding, "Ultimately, this will lead to tax issues such as carbon taxes and diesel taxes, which are measures based on the assumption of increased gasoline and diesel prices, thus increasing the burden on citizens."

Visitors attending the 2020 Hydrogen Mobility+ Show held at KINTEX in Goyang, Gyeonggi Province, are examining the cross-section of a hydrogen electric vehicle. Photo by Hyunmin Kim, Goyang kimhyun81@

The shock is expected to be more concentrated on small and medium-sized enterprises (SMEs) than on large corporations. Unlike large corporations that have been preparing for changes for several years by strengthening ESG (Environmental, Social, Governance), most small and medium-sized partner companies are unprepared for greenhouse gas emissions.

A chemical industry official said, "Considering the business environment weakened by the pandemic, it is unreasonable to accelerate the carbon neutrality transition too quickly just for show to the international community," adding, "A wise transition should be made while carefully supporting the weak links in our industry." There are about 2,800 internal combustion engine vehicle partner companies nationwide, employing nearly 250,000 people. Measures need to be prepared for the transition from internal combustion engine vehicles to electric and hydrogen vehicles.

Choi Seung-il, Professor Emeritus at Korea University, also emphasized, "The process of moving toward carbon neutrality is a great transformation of social, economic, and industrial structures. During this process, polarization may deepen and job losses may occur," adding, "The government’s most important effort should be a just transition to a carbon-neutral society." He also warned, "If the government makes rapid financial investments under the concept of a catalyst, it may inadvertently foster zombie companies or zombie ventures, causing distortions."

◆ Ruling party and government to promote Green New Deal Basic Act = Meanwhile, on the same day, the Democratic Party of Korea and the government held a party-government consultation and agreed to promptly finalize related legislation, including the Green New Deal Basic Act, Climate Change Response Act, Climate Technology Development Promotion Act, Renewable Energy Act, and Electricity Business Act, to achieve carbon neutrality.

The government plans to analyze sector-specific carbon reduction amounts and announce the '2050 Carbon Neutrality Scenario' by the first half of next year. Based on this scenario, it will establish policy promotion strategies by sector such as energy, industry, and transportation in the second half of next year. Going forward, this carbon neutrality policy direction will be reflected in national plans such as the Basic Energy Plan and the Basic Electricity Supply and Demand Plan.

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