South Korea to get up to speed for international greenhouse gas reduction

By Kim Sung-woo

South Korea pledged to reduce its emissions of 291 million tons of greenhouse gas (GHG) by 2030. Of the 291 reduction, 11.5 percent, or 33.5 million tons, must come from international mitigation projects, which include technical support, investment and procurements conducted to achieve GHG reduction targets as stipulated under Article 6 of the Paris Agreement.

In Korea, the Framework Act on Carbon Neutrality, which took effect in March 2022, sets forth a statutory basis for international mitigation projects and procedures for their implementation. An example is an arrangement under which Korean companies or Korean government agencies push for GHG reduction projects overseas and receive carbon credits transferred to Korea. Given the large size of the reduction target, the Korean government has been hustling.

In August, the Committee on 2050 Carbon-Neutral Green Growth held the first meeting of the International Mitigation Council (or the Council). The Committee reviewed various strategies to promote international GHG reductions and also established operation protocols of the Council. Empowered by the Framework Act on Carbon Neutrality, the Council is to deliberate and coordinate matters related to international GHG mitigation projects.

Senior officials from nine government ministries including the Office for Government Policy Coordination, the Ministry of Strategy and Finance, the Ministry of Trade, Industry and Energy, and the Ministry of Environment, are in charge of arranging and reviewing prior approval of international mitigation projects. They are also responsible for the registration of international mitigation outcomes and transfer of the relevant credits into Korea; the formation and operation of an international mitigation partnership with foreign governments; and strategies to promote international mitigation projects.

In particular, the strategies for promoting international mitigation projects include establishing criteria for providing government support, electronic registries for international mitigation projects, roadmaps for international mitigation through 2030 and annual government support plans by 2030. In September 2022, a meeting of public-private, called the Partnership for International Greenhouse Gas Reduction Projects in the Industrial and Energy Sectors was presided over by the Ministry of Trade, Industry and Energy. It was held to discuss the ministry's policy initiatives, including the budget for pilot projects in 2023, bilateral agreements with countries on priority, and support plans of the dedicated agencies (e.g., Korea Energy Agency and KOTRA). During the meeting, the Partnership also checked the current status of international mitigations by the private sector and discussed practical difficulties faced by companies.

In particular, the pilot projects include not only an investment that subsidizes part of the costs of companies operating under the bilateral agreement (Article 6.2 of the Paris Agreement) but also the government's plan for purchasing carbon credits through competitive bidding or procurement contracts.

Around the same time, the Ministry of Environment also announced its plans to promote international mitigation projects in the sector of waste and water management. The main highlight is to support up to 80 percent of the cost of feasibility studies and the installation of GHG reduction facilities for eligible companies while securing carbon credits.

In addition, the Guidelines for Pre-approval of International Mitigation Projects and Acquisition of International Mitigation Outcome, empowered by Article 35 of the Framework Act on Carbon Neutrality, took effect in January this year. The guidelines set forth the procedures for pre-approval of international mitigation projects; the reporting of international mitigation outcomes and their acquisition, transaction and extinguishment; the criteria and procedures for pre-approval of international mitigation outcome transfer; and partnerships with foreign governments in bilateral agreement for international mitigations.

This year, the Korean government embarked on promoting and supporting international mitigation projects via public-private partnerships at full speed. In January, the Ministry of Environment launched the Partnership for Promotion of International Mitigation in the Environment Sector with industry stakeholders to discuss various ways of identifying new projects, providing government support and easing the regulatory burden ― all geared toward securing international mitigation outcomes.

The ministry has previously supported feasibility studies for Vietnam's international mitigation projects and Uzbekistan's power generation project based on landfill gas. In 2023, the ministry stepped up its budget, totaling 10 billion won ($7.57 million). The Ministry of Trade, Industry and Energy held a "Seminar on the 2023 International GHG Reduction Project" in late February. The ministry will select pilot projects for international mitigation in the industrial and energy sectors, with a total subsidy of 6 billion won (up to 3 billion won per project) this year.

Eligible projects include projects to invest in new and renewable, high-efficiency, and low-carbon facilities that can reduce GHG emissions, including design, purchase, installation and a pilot test of the facilities. The government plans to subsidize part of the investment costs of companies, focusing on priority countries including Vietnam, Mongolia, the UAE, and Indonesia, and secure corresponding international mitigation outcomes to achieve the Nationally Determined Contributions by 2030.

In Korea, the government has been in the driver's seat to reduce GHG emissions to conform to international standards. Collaboration across different government agencies and ministries as well as partnerships with private companies will be essential to secure key technologies and resources to achieve the emission reduction target.

The large reduction target is clearly a big challenge, but we should also think about how to turn that challenge into new business opportunities in this journey to a low-GHG society. Companies need to keep up with the government's efforts in getting ready for international mitigations and partnerships.

Kim Sung-woo is head of Environment & Energy Research Institute at Kim & Chang.