"Carbon Neutrality Cost Estimated at 2620 Trillion Won... Private Sector Participation Needed"

‘Strengthening the Role of Finance for Carbon Neutrality’ Seminar

It is estimated that Korea will require 2,620 trillion won in funding to achieve carbon neutrality by 2050. Since it is difficult to cover this solely with government budgets or policy finance, there is a need to provide incentives to encourage private investment.

At the 'Strengthening the Role of Finance for Carbon Neutrality' seminar held on the 15th at the Korea Federation of Banks Building in Jung-gu, Seoul, participants, including Kim Sang-hyeop, Private Sector Chairman of the Presidential 2050 Carbon Neutral Green Growth Committee (third from the left in the front row), are taking a commemorative photo.
[Photo by Oh Gyu-min moh011@]

On the 15th, Lee Byung-yoon, Senior Research Fellow at the Korea Institute of Finance, delivered a keynote presentation on this topic at the seminar “Strengthening the Role of Finance for Carbon Neutrality,” jointly hosted by the Presidential Committee on 2050 Carbon Neutrality and Green Growth and the Korea Institute of Finance. When estimating the policy costs required to reduce carbon emissions, Lee stated that the EU (European Union) would need up to 2.28 trillion euros (approximately 3,436.2564 trillion won), China 1.62 trillion dollars, and Korea is expected to require up to 2,620 trillion won by 2050. He added, “It is difficult to cover these costs with public finance such as government budgets or policy finance alone, so discussions are needed on how to attract private finance.”

First, Lee argued that policy finance must take the lead to ensure that the financial support measures for climate crisis response, announced by the government last March, are implemented timely and as planned. Since this sector involves significant information asymmetry and risks, leaving it solely to the market would result in ‘market failure.’ He said, “Instead of individual policy finance institutions implementing policies independently, the Korea Development Bank should expand its role in green finance to enable coordination among them.”

Additionally, to achieve carbon neutrality, he proposed measures including ▲utilizing a ‘Green Bank’ dedicated to finance in climate change and clean energy sectors ▲adjusting private financial institutions’ portfolios by reducing high-carbon assets and expanding green assets ▲providing carbon neutrality loan incentives to small and medium-sized enterprises ▲supporting climate tech (climate + technology) finance.

On the 15th, panelists are discussing at the seminar titled 'Strengthening the Role of Finance for Carbon Neutrality' held at the Korea Federation of Banks Building in Jung-gu, Seoul.
[Photo by Oh Gyumin]

Panel discussions also emphasized the urgent need for private financial participation. Kim Jung-in, Professor Emeritus of Economics at Chung-Ang University, said, “There must be bold incentives for private investment,” adding, “Along with low-interest benefits, tax benefits should also be provided.” Kim Hee, Head of POSCO’s Carbon Neutrality Strategy Office, noted that POSCO is spending 640 billion won to switch its steel production method from blast furnaces to electric furnaces, and the costs for carbon reduction are increasing. He said, “Since subsidies are expanding in places like the EU, competitive carbon neutrality support policies are necessary for companies.”

Concerns were also raised about sustainability management reports published by many companies even though they are not mandatory. Due to the lack of clear standards for report disclosure, greenwashing?corporate behavior that disguises itself as environmentally friendly?is occurring. Hyun Seok, Professor at Yonsei University’s Graduate School of Environmental Finance, said, “Some companies selectively disclose only the ESG (environment, social, governance) information they want to show,” adding, “Many corporate policies are limited to declarations of ‘making efforts’ with unreliable statements regarding environmental policies,” and suggested the need to strengthen disclosure standards.

The Financial Services Commission announced that through the Climate Finance Task Force, it will establish a policy finance support system and discuss ‘transition finance’ with various stakeholders to help companies shift from high-carbon to low-carbon industries. Kwon Yu-i, Director of the Industrial Finance Division at the Financial Services Commission, said, “There are legislative gaps in the promotion of finance under the Carbon Neutrality and Green Growth Framework Act (Carbon Neutrality Act) enacted for climate crisis response, but we will discuss with the National Assembly and others to ensure smooth progress without concerns.” Article 58 of the Carbon Neutrality Act stipulates that the government must establish and implement financial policies for carbon neutrality and that promotion matters should be separately defined by law. However, subordinate legislation regulating these delegated matters has not yet been enacted.

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