Without Speed Adjustment, Carbon Neutrality Law Leaves SMEs 'On the Verge of Collapse'

Auto Parts Industry: "Carbon Neutrality Act Affects Industrial Ecosystem... Speed Must Be Considered"

As the passage of the Carbon Neutrality Act in the National Assembly plenary session is anticipated, concerns are growing among small and medium-sized enterprises, especially in the automotive parts industry. Photo by Asia Economy DB

[Asia Economy Reporters Kim Jong-hwa, Kim Hee-yoon] As the passage of the "Carbon Neutrality and Green Growth Basic Act (Carbon Neutrality Act)," which stipulates a 35% reduction in greenhouse gas emissions by 2030 compared to 2018, is expected in the National Assembly plenary session, concerns are deepening among small and medium-sized enterprises (SMEs), especially in the auto parts industry.

While the necessity of reducing greenhouse gases is understood, it is practically impossible for SMEs with weak financial power to endure the rapid pace and standards set by the government and ruling party.

The sector expected to suffer the most damage is the auto parts industry. The Korea Automobile Manufacturers Association estimates that about 3.85 million electric vehicles need to be distributed to achieve the target of reducing net emissions by more than 35% compared to 2018. They argue that the sudden expansion plan was pushed forward despite the already difficult situation of cumulatively distributing 3.64 million vehicles by 2030 to achieve the existing 24% carbon reduction target.

The association is concerned about the reduction in the number of parts due to the shrinking internal combustion engine vehicle market. Based on research results showing that sales in the auto parts industry will decrease by more than 15% in the future and that the workforce required for electric vehicle production is only 38% compared to internal combustion engine vehicles, the association anticipates a mass unemployment crisis.

Both business owners and workers in SMEs will be hit harder. A representative of an auto parts company in Siheung, Gyeonggi Province said, "Due to the ongoing impact of COVID-19 since last year, the domestic market has been stagnant, and we are barely surviving through exports," adding, "While we agree with the major direction of industrial change to electric vehicles and carbon emission reduction, if this is forced without sufficient time and support measures, SMEs will inevitably be pushed into a situation where operating businesses domestically becomes impossible."

The industry estimates that about 240 million tons of carbon must be reduced by 2030 according to the bill. This is three times the annual carbon emissions of POSCO (81.48 million tons). The previous target was a 26.3% reduction compared to 2018. A representative from the Korea Federation of SMEs stated, "Most of our SMEs are in manufacturing, so they inevitably have high carbon emissions," and countered, "It is unacceptable to set goals at levels that companies cannot endure and then tell them to meet them on their own."

Economic organizations such as the Korea Chamber of Commerce and Industry (KCCI) discussed countermeasures for the passage of the Carbon Neutrality Act at a meeting held on the 25th in the KCCI conference room. Woo Tae-hee, Vice Chairman of KCCI, said, "Achieving carbon neutrality by 2050 is definitely the path we must take, but during this process, we must sufficiently consider the realities of our industry and the level of reduction technology," adding, "Especially since the 2030 Nationally Determined Contribution (NDC) for greenhouse gas reduction will have an immediate and direct impact on companies, we will work jointly with industry associations to ensure that industry opinions are fully reflected."

Meanwhile, Professor Eom Ji-yong of the KAIST Department of Technology Management diagnosed, "It is true that the level is difficult for the domestic industry to handle, but considering the carbon border tax currently being promoted by the US and Europe in our export-oriented economic structure, it is advantageous in the long term to strongly pursue carbon neutrality for industrial competitiveness, even if it is difficult and challenging."

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