Review Begins on Introducing Carbon-Inclusive Budgeting System Next Year... Questions on Effectiveness

The Democratic Party Proposes Introduction Bill... Deputy Minister of Economy and Finance Says "There Are Practical Difficulties"

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] The government will begin reviewing the introduction of a carbon-aware budgeting system starting next year to achieve 'carbon neutrality (net zero carbon emissions) by 2050.'

According to the Ministry of Economy and Finance on the 13th, the government plans to commission a research project as early as the beginning of next year to develop methodologies for measuring and analyzing greenhouse gas emissions and reductions.

This marks the first step toward establishing a 'carbon-neutral friendly fiscal program,' as mentioned by President Moon Jae-in on the 10th, who stated, "We will lay a solid foundation for a carbon-neutral society within my term."

The carbon-aware system is designed to evaluate the impact of various government-funded policies on carbon reduction and to reflect the results in the government's budget formulation and execution.

Earlier, Representative Yang Yi-won of the Democratic Party of Korea introduced a revision bill to the National Finance Act in July that includes measures to implement the carbon-aware system.

The amendment stipulates the preparation of a 'carbon reduction-aware budget statement,' which analyzes the anticipated impact of the budget on carbon reduction, and a 'carbon reduction-aware settlement statement,' which evaluates whether the budget was executed in a manner that improves carbon reduction.

As a manufacturing-centered country, South Korea ranks seventh in the world for carbon dioxide (CO₂) emissions, a primary cause of climate change.

Therefore, there are calls for the continuous analysis of whether various policy projects are planned and executed in ways that reduce carbon emissions by introducing a carbon reduction-aware budgeting and settlement system.

However, some remain skeptical about the feasibility of the carbon-aware system. They argue that it is not easy to distinguish which budgets qualify as 'carbon reduction-aware budgets,' and analyzing the budget's effects is also challenging.

A senior expert from the National Assembly's Planning and Finance Committee stated in a review report on Representative Yang's bill, "It is necessary to consider that accurately measuring the impact of national finances on carbon reduction is difficult and that the administrative costs required for this are considerable."

He also mentioned, "Since carbon reduction effects appear in the medium to long term and cumulatively, it is necessary to establish long-term plans to reduce carbon emissions. Setting performance goals and analyzing and evaluating effects linked to a single fiscal year's budgeting and settlement system may not be entirely appropriate."

There are concerns that without a sophisticated analytical framework capable of quantifying the impact of fiscal investments on carbon reduction, the system could follow the same path as the gender-aware budgeting system, which, despite being introduced over ten years ago, has not been properly established.

Kim Yong-beom, the first vice minister of the Ministry of Economy and Finance, said at the National Assembly's Finance and Economy Subcommittee on the 18th of last month, "To achieve 'net zero' over 30 years, we need to consider not only carbon-aware budgeting but also more advanced measures."

He added, "Even though other countries have analytical frameworks and have operated awareness budgeting systems for over ten years, the Ministry of Economy and Finance remains silent on the matter. There are practical difficulties in expanding these systems into other areas without conducting effectiveness evaluations, questioning whether this is the most effective way to enhance policy effectiveness."

The government plans to conduct the research project next year first and then analyze the results to design the carbon-aware system in the medium to long term.

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