Companies Push for Decarbonization While Preliminary Feasibility Studies Lag... Carbon Neutrality R&D Faces Risk of Budget Allocation Failure Next Year

[Image source=Yonhap News]

원본보기 아이콘

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government’s preliminary feasibility study (PFS) results on projects supporting the development of corporate carbon reduction technologies, such as 'hydrogen reduction steelmaking,' are expected to be announced in the second half of the year, more than three months later than originally planned. As the government begins the budget formulation process for next year starting next month, concerns are rising that if the PFS process is not completed within the first half of the year, even the budget allocation for the project next year could become uncertain. There are also worries that the burden on companies, which must invest astronomical costs for decarbonization, will increase further.

According to the Ministry of Science and ICT on the 18th, the announcement of the PFS results for the 6.729 trillion KRW Carbon Neutral Industry Core Technology Development project, applied for by the Ministry of Trade, Industry and Energy, is expected to be postponed from May to around August. A Ministry of Science and ICT official stated, "Since the industries supported by this project number 13, there are many aspects to review," adding, "We expect to complete the PFS review around August, or at the latest September." The official also added, "If the review period is extended, there is a possibility that it will not be reflected in next year’s budget formulation."

The Carbon Neutral Industry Core Technology Development project focuses on supporting technology development to convert carbon-emitting processes in industries such as steel, petrochemicals, and cement into low-carbon or carbon-free processes from 2023 to 2030. For example, in the steel industry, the government plans to provide a total of 1.0597 trillion KRW in support, of which 800 billion KRW will be invested in developing hydrogen reduction steelmaking technology that produces molten iron using hydrogen instead of coal, as well as in building demonstration plants. According to the government roadmap, the Ministry of Trade, Industry and Energy applied for the PFS to the Ministry of Science and ICT in September last year, passed the technical evaluation in October, and the Ministry of Science and ICT was scheduled to complete the PFS process by May this year.

원본보기 아이콘

The problem lies in the fact that at the current pace of the PFS review, it cannot be ruled out that this project will be excluded from next year’s budget formulation. If this happens, the government’s plan to support the development of corporate carbon reduction technologies will be delayed by another year starting next year. A government official said, "To allocate the project budget from next year, the PFS review must be completed by May when discussions on the government budget proposal begin," adding, "Companies want to receive carbon-neutral R&D support as soon as possible, but government procedures are not keeping up with industry demand, which is frustrating."

The industry points out that the government should expedite the PFS review to accelerate support for the development of corporate carbon reduction technologies and significantly expand the scale of support. Among carbon reduction technologies, many, such as hydrogen reduction steelmaking, have high technical barriers and large development risks, requiring substantial R&D costs, making government support essential. According to estimates by the Korea Iron & Steel Association, a total of 109.4 trillion KRW is needed for R&D, facility investment, and sunk costs alone for applying hydrogen reduction steelmaking technology.

An industry official said, "Carbon neutrality is a direction we must pursue, but the burden is too great for the industry to bear all the risks," adding, "The government needs to actively support initial technology development and demonstration, and once business feasibility is confirmed, companies can undertake large-scale investments, sharing the burden."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.