Environmental Thinking
Korea is subject to the strictest greenhouse gas regulations in the world. Some say that the Korean government is acting as a significant obstacle to the domestic manufacturing sector. Three months ago, it set a goal of 37 percent below the BAU level for 2030.
On Sept. 16, Bloomberg New Energy Finance (BNEF) reported the result of its comparison among different countries’ BAU levels and reduction goals on equal terms. According to it, Korea has to reach 28 percent by 2030, whereas the figures are limited to 8 percent for the United States and negative for the European Union, China, and Russia. With country-specific conditions taken out of consideration, Korea has to reduce greenhouse gas emissions by 53 percent between 2010 and 2030, second only to China by a margin of only one percentage point.
The Korean government has put pressure on companies by means of the emissions trading system (ETS) since the beginning of this year, after allotting 1,600,008,650 KAU to 525 companies for the three-year period until 2017. In response, the Federation of Korean Industries (FKI) said that a number of R&D projects by foreign-invested enterprises have gone to other countries due to the ETS, and it is likely to keep affecting investment in new facilities and industrial output. According to the FKI’s data released in April, foreign enterprises’ investment plans worth a total of over one trillion won have been canceled since the implementation of the ETS.
The domestic manufacturing sector is facing an increasing cost burden, too. According to the Korea Iron & Steel Association, the steel industry asked for 327 million tons of carbon credits, but the government is seeing 3.06 million tons as an appropriate level, signifying that companies in the industry have to pay for carbon credits equivalent to 21 million tons or pay penalties. Things are not that different in sectors such as semiconductor, displays, chemicals, and oil.
The effectiveness of the ETS is increasingly doubted as well. According to the Korea Exchange, no carbon credit was traded in the Korean stock exchange between April and this month. Experts point out that this is because sellers are unwilling to trade their credits, with the government controlling the price.