Ministry of Industry Invests 5 Trillion Won in 'Carbon Neutrality'... 1 Trillion Support for Steel Hit Hard by 'EU Carbon Tax'

Ministry of Industry to Invest 5 Trillion KRW in Carbon Reduction R&D for Industry and Energy Sectors by 2030
Preliminary Feasibility Study Application to Ministry of Science and ICT in September... Incentives Including Tax, Finance, and Regulatory Exceptions to Ease Private Sector Burden

[Sejong=Asia Economy Reporter Kwon Haeyoung] The Ministry of Trade, Industry and Energy will invest 5 trillion won by 2030 in research and development (R&D) of carbon reduction technologies in the industrial and energy sectors. At least 1 trillion won will be poured into the steel industry, which will be directly hit by the Carbon Border Adjustment Mechanism (CBAM) fully introduced by the European Union (EU) in 2026. The plan aims to achieve domestic carbon reduction targets while alleviating the burden on the domestic industry and actively supporting private sector technological innovation in preparation for the imposition of carbon border taxes, a new global trade barrier by countries such as the EU and the United States.

According to related ministries on the 17th, the Ministry of Trade, Industry and Energy is preparing a public-private carbon-neutral R&D support cooperation project for the industrial and energy sectors and plans to apply for a preliminary feasibility study to the Ministry of Science and ICT in September. The project scale is about 5 trillion won.

An official from the Ministry of Trade, Industry and Energy said, "Energy is a public sector, but industry is a private sector, so the shock during the carbon-neutral transition process is significant, and it is necessary to alleviate the burden of carbon-neutral transition costs on private companies." He added, "We plan to establish and announce a carbon-neutral R&D strategy including a technology roadmap around September and apply for the preliminary feasibility study reflecting this." He further explained, "Currently, we are in the stage of consulting with the Ministry of Science and ICT on the details to apply for a comprehensive carbon-neutral R&D preliminary feasibility study, so the project scale may change."

This carbon-neutral R&D support by the Ministry of Trade, Industry and Energy will focus on high carbon-emitting industries such as steel, petrochemicals, cement, and refining, considering that these sectors face the greatest impact from carbon-neutral implementation. The carbon emissions of these four major industries accounted for 75.8% of the total industrial sector in 2018.

In particular, more than 1 trillion won will be supported for eco-friendly process transition R&D in the steel industry, which has the highest carbon emissions. Steel companies use coal to melt iron ore into molten iron, which emits a tremendous amount of carbon. POSCO is focusing on developing 'hydrogen reduction steelmaking' technology that uses hydrogen instead of coal to produce molten iron and has announced plans to invest 10 trillion won by 2050. The government intends to actively support such private sector carbon reduction efforts.

The government’s support for private companies’ carbon-neutral new technology R&D is due to the high proportion of manufacturing in Korea’s gross domestic product (GDP), which stands at 27.8%, resulting in a significant burden on the industrial sector from carbon neutrality. According to recent Greenpeace analysis, the carbon border tax burden on the domestic steel industry due to the EU’s CBAM introduction is expected to reach up to 472.8 million dollars by 2030, accounting for 16.67% of steel exports to the European market.

The government plans to strengthen incentives across all areas, including tax, finance, and regulatory exemptions, to support carbon-neutral new technology R&D.

The Ministry of Trade, Industry and Energy will invest 5 trillion won in carbon-neutral R&D by 2030 and significantly lower the barriers for large companies like POSCO to actively utilize government R&D projects. For example, currently, large companies can receive government support for only 33% of R&D costs, but if it pertains to carbon-neutral technology, the government support ratio will be expanded to 67%, the level of small and medium-sized enterprises.

The Ministry of Trade, Industry and Energy plans to focus on supporting companies’ carbon neutrality by enacting the 'Carbon Neutrality Special Act' soon, establishing a carbon-neutral R&D strategy including a technology roadmap by September, and announcing the '2050 Carbon Neutral Industrial Transformation Vision and Strategy' within the year.

The business community is raising strong demands for expanded tax support for R&D and facility investment related to carbon-neutral transition technologies. There are also calls to significantly increase the government’s new budget for carbon reduction technology development.

If the 5 trillion won-scale public-private cooperative carbon-neutral technology R&D project promoted by the Ministry of Trade, Industry and Energy passes the preliminary feasibility study, the annual budget input from 2023 to 2030 will be 600 to 700 billion won. This is about 5-6% of the Ministry of Trade, Industry and Energy’s budget for this year (11.186 trillion won). Since there is considerable overlap with existing budgets, there are calls to increase support for carbon reduction new technology R&D at the government-wide level, including the Ministry of Trade, Industry and Energy. For example, the Australian government plans to invest 18 billion Australian dollars (about 15.5 trillion won) by 2030 in developing low-carbon emission technologies for companies, which is three times the budget the Ministry of Trade, Industry and Energy plans to invest by 2030.

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