Suspension of Public Financial Support for Overseas Coal Power Projects Starting Next Month (Comprehensive)

Continued Support for Already Approved Projects

[Sejong=Asia Economy Reporters Kim Hyunjung and Kwon Haeyoung] The government will completely halt public financial support for overseas coal power projects starting from next month, the 1st. The government also plans to guide some private institutions in which it holds shares to stop related support.

On the 24th, the government announced the 'New Overseas Coal Power Public Financial Support Guidelines' jointly with related ministries. This is a follow-up measure to President Moon Jae-in's declaration at the Climate Summit in April to stop public financial support for new overseas coal-fired power plants, prepared through practical consultations among related ministries. The purpose is to specify the intent of the public financial support suspension declaration while reflecting industry opinions and international organizations' related discussion trends to reduce confusion on the ground.

The 'public financial support' mentioned in the guidelines is a concept encompassing official development assistance (ODA), export finance, investment, etc., conducted by the government, local governments, and public institutions, and will apply to all public institutions from October 1. Accordingly, public financial support for newly initiated overseas coal power projects and facilities will be suspended, and additional matters such as maintenance and repair of coal power facilities and the application of carbon capture, utilization, and storage (CCUS) technology will be subject to future international agreements. Currently, a revised OECD coal understanding proposal containing specific support principles and exceptions related to this is under discussion.

However, considering economic and diplomatic trust relationships with partner countries and project progress, support for already approved projects such as Indonesia's Java Units 9 and 10 and Vietnam's Vung Ang 2 is allowed. Essential ancillary transactions accompanying financial agreements, such as performance guarantees, swaps, and letter of credit issuance, can also be supported.

Private institutions may also be affected by these guidelines in the mid to long term. The government plans to guide private institutions in which it holds shares and participates in decision-making through boards of directors to stop financial support for new overseas coal power projects.

A government official said, "We will prevent confusion on the ground through the distribution and promotion of the guidelines," adding, "We expect to clearly deliver policy signals to domestic companies and actively contribute to the globally expanding discussions on stopping coal power investments." This ban on coal export finance is significant as it reaffirms the government's domestic 'de-coal' policy stance.

However, some concerns have been raised that rapidly reducing the share of coal power and nuclear power, which are base-load power sources with low generation costs, could increase future power supply instability and pressure for electricity price hikes. According to the Ministry of Trade, Industry and Energy's '9th Basic Plan for Electricity Supply and Demand' announced at the end of last year, the government plans to reduce the share of coal power from 28.1% in 2020 to 15% by 2034. The operating rate of coal power plants is already declining. The operating rate of coal power plants among five power generation companies under Korea Electric Power Corporation fell from 84% in 2016, just before the current government took office, to 59.3% in 2020.

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