When Internal Combustion Engine Vehicles Are Phased Out, 3,000 Parts Suppliers Face Bankruptcy... "Need to Adjust Carbon Neutrality Pace"

Carbon Neutrality Committee Warns of Ecosystem Collapse if Internal Combustion Engine Cars Are Phased Out by 2050
Germany and Japan Research Eco-Friendly Fuels as Carbon Zero Stepping Stones
To Prevent Internal Combustion Ecosystem Collapse, Korea Also Needs to Recognize 'e-Fuel' and Adjust Carbon Neutrality Pace

[Sejong=Asia Economy Reporter Kwon Haeyoung] Concerns are growing that the domestic automobile industry, a key sector in Korea, may face a crisis of losing manufacturing competitiveness due to the government's 'over-speeding' carbon neutrality policy push. This is because the Ministry of Environment is advocating for a reduction in the share of hybrid vehicles by 2030, and the Carbon Neutrality Committee, which serves as the inter-ministerial control tower for the national carbon neutrality policy, reportedly has many internal opinions supporting the Ministry of Environment's stance calling for 100% adoption of electric and hydrogen vehicles by 2050. While carbon neutrality to respond to global climate change is absolutely necessary, criticism is rising that the Carbon Neutrality Committee, which will establish the 2030 and 2050 carbon neutrality policies, should adjust the speed of carbon neutrality policies so as not to damage manufacturing competitiveness.

◆Concerns over the phase-out of internal combustion engine vehicles in 14 years... Ecosystem collapse due to over-speeding carbon neutrality＝ The automobile industry fears that if the Carbon Neutrality Committee and others do not recognize internal combustion engine vehicles using carbon-neutral fuels such as e-fuel as a means of carbon reduction by 2050, the internal combustion engine vehicle ecosystem could rapidly collapse.

As of 2019, the number of domestic companies exclusively producing internal combustion engine parts was 2,815. The Korea Automotive Technology Institute predicted that if the share of electric and hydrogen vehicles expands to the government's 2030 supply target of 33%, the number of companies exclusively producing internal combustion engine parts will decrease by 900 to 1,915. Employment is expected to decrease by 35,000 during the same period.

An industry official said, "The automobile parts industry accounts for 6.2% of employment, 6.5% of production, and 3.6% of exports in the domestic manufacturing sector," adding, "If internal combustion engine vehicles are phased out early, the domestic automobile parts industry is expected to collapse rapidly without even having time to reorganize their businesses."

Despite this situation, it is reported that there are many opinions within the Carbon Neutrality Committee supporting the Ministry of Environment's claim that the supply speed of electric and hydrogen vehicles should be accelerated. The Ministry of Environment is advocating for a reduction in the share of hybrids by 2030. The government set a goal at the State Council meeting in February to supply 3 million electric vehicles, 850,000 hydrogen vehicles, and 4 million hybrids by 2030, but the Ministry of Environment has since demanded an expansion of the pure electric and hydrogen vehicle share, citing the planned upward revision of the 2030 Nationally Determined Contribution (NDC). Whether the Carbon Neutrality Committee, which had leaned toward the Ministry of Environment's position, will accept the demands of the Ministry of Trade, Industry and Energy and the automobile industry to recognize internal combustion engine vehicles using eco-friendly fuels as a carbon reduction means by 2050 remains a key issue.

◆"E-fuel, a stepping stone for future vehicle transition"… Germany and Japan also conducting R&D＝ The automobile industry unanimously argues that through the development of eco-friendly fuel technologies such as e-fuel, the internal combustion engine vehicle ecosystem should be given time to respond to carbon neutrality by 2050 and to reorganize their businesses. Although e-fuel is still in the early stages of development and its feasibility and economic viability are questioned, they argue that the possibility of technology realization and expansion should be kept open to facilitate a smooth transition to carbon neutrality for internal combustion engine vehicles.

A government official said, "The supply of electric and hydrogen vehicles may proceed faster than expected, and internal combustion engine vehicles may maintain their market share for some time," emphasizing, "If e-fuel is recognized as a carbon reduction means, it can create a virtuous cycle of increased R&D investment, scaling up of facilities, securing economic feasibility, and continued use of internal combustion engine vehicles, so the market should not be prejudged and possibilities should be kept open."

Germany and Japan, traditional strongholds of internal combustion engine vehicles, are also actively supporting e-fuel research and development. Germany's Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) announced a Power-to-X (P2X) implementation plan for e-fuel production in 2019. The Japanese government also set a goal in 2020 to develop e-fuel as a carbon neutrality measure and to realize e-fuel prices below gasoline prices by 2050. German automaker Audi and Japanese automakers Toyota, Nissan, and Honda have also started e-fuel research.

The industry agrees that the Carbon Neutrality Committee should consider these industrial realities in the upcoming carbon neutrality roadmap formulation process. The Carbon Neutrality Committee plans to announce the 2030 NDC upward revision (currently a 24.4% reduction compared to 2017) and the 2050 carbon neutrality roadmap by the end of October. Especially since there are many criticisms that the committee includes many eco-friendly civic groups and academics but excludes industry representatives, there are calls for the committee to listen to the industry's voice from now on.

A business community official said, "We agree with the overall direction of carbon neutrality," but emphasized, "Since the implementation process involves pain for the industry, it is necessary to adjust the speed of carbon neutrality and provide policy support to the industry."

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