They Told Me to Switch to an Eco-Friendly Boiler... Subsidies 'Run Out' in Less Than Three Months

Increased Demand for Mandatory Installation... Early Exhaustion Due to Budget Shortage
Number of Eco-Friendly Boilers Installed in Seoul Up 41 Times in Last 3 Years
This Year's Budget at 64% of Last Year's, Ministry of Environment "Considering Budget Reallocation by Local Governments"

Due to the enforcement of the "Special Act on Air Quality Improvement in Air Management Zones," the installation of eco-friendly boilers has been mandatory when replacing old boilers since April last year. The photo shows a condensing boiler, an eco-friendly boiler.
[Photo by Asia Economy DB]

[Asia Economy Reporter Lee Junhyung] This year’s budget for supporting the installation of eco-friendly boilers has been exhausted within three months. Since the installation of eco-friendly boilers became mandatory last year, demand from households surged, but the government failed to accurately predict the demand and instead cut the support budget. The Ministry of Environment stated that the budget had to be set based on the 2019 performance rather than the previous year, making the reduction inevitable.

According to Seoul City on the 30th, most of the city’s budget of 7.665 billion KRW for supporting eco-friendly boiler installations this year has been allocated to recipients. Some district offices have already exhausted their annual support funds, meaning consumers who want to buy or replace boilers can no longer receive subsidies.

Since the enforcement of the “Special Act on Improvement of Air Quality in Air Quality Control Zones” in April last year, installation of eco-friendly boilers with low nitrogen oxide (NOx) emissions, a cause of fine dust, has been mandatory in the designated zones. Accordingly, households installing eco-friendly condensing boilers, which are more expensive than regular boilers, receive a subsidy of 200,000 KRW per boiler. The subsidy is provided by the government and local governments at a certain ratio to consumers who purchase condensing boilers. However, the support budget ran out before the first quarter of this year ended.

Use Eco-Friendly Boilers to Protect the Environment... But Budget Is Cut

The government allocated budgets to each local government while conducting the “Support Project for Distribution of Low-NOx (NOx) Boilers for Household Use.” Jung-gu, Seoul, which has a relatively small population, allocated a budget of 100 million KRW (200,000 KRW per household) aiming to distribute 500 eco-friendly boilers this year. According to our investigation, as of the 25th, applications have closed and all recipients have been determined. The situation is similar in nearby Jongno-gu.

Gyeonggi Province’s situation is slightly better, but about 70% of the 6.67 billion KRW budget has already been allocated. Some areas like Namyangju and Uijeongbu have already exhausted their budgets.

The rapid depletion of the budget is due to increased consumer awareness of eco-friendly boiler installation, while the related budget was actually reduced. The main budget allocated to this project this year is about 30 billion KRW, only 64% of last year’s actual budget of 46.9 billion KRW.

The problem lies in the speed at which the budget was exhausted. Running out before the end of the first quarter is the result of poor demand forecasting. Demand for condensing boilers has surged over the past three years due to the eco-friendly trend and mandatory regulations. According to Seoul City and Gyeonggi Province, the number of eco-friendly boilers installed through support projects in Seoul and Gyeonggi increased from 2,982 and 5,900 units in 2018 to 122,969 and 117,422 units last year, respectively.

Eco-friendly condensing boiler. Photo by Asia Economy DB

Budget Cut Due to Setting Budget Based on Performance Two Years Ago

The cause of the budget cut lies in poor project performance in 2019. The budget execution rate in 2019 was only 19%, contrasting with 89% and 88% in 2017 and 2018, respectively. A Ministry of Environment official in charge of the project explained, “In 2019, anticipating mandatory regulations, local governments increased their budgets expecting sufficient demand, but due to lack of awareness about eco-friendly boilers, demand was lower than planned.” The official added, “Since the budget plan for the next year is made every April, this year’s budget was set based on 2019 performance, so the surge in demand last year may not have been reflected in the budget.”

Seoul City and Gyeonggi Province plan to secure additional budgets, but it is uncertain whether this will be possible. A Seoul City official said, “We plan to request an increase as about 4.7 billion KRW in additional budget is expected to be needed, but it is uncertain if it will be approved.” Gyeonggi Province plans to reallocate budgets within its cities and counties to address urgent needs and, if unavoidable, request additional national government support. An industry insider expressed suspicion, saying, “Even if the boiler budget is cut, consumers have no choice due to the mandate,” and added, “Isn’t the budget cut because it became mandatory?”

The Ministry of Environment stated it would consider budget reallocation. A Ministry of Environment official said, “We will review budget reallocation by local governments after reviewing first-quarter execution results,” and added, “If the increased demand is clearly confirmed, the budget for the next year is likely to be increased.”

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