How to enjoy the journey to carbon neutrality

By Kim Sung-woo

According to Climate Action Tracker, which tracks climate pledges and policies around the world, as of November 2021, 140 countries ― which account for 90 percent of the world's greenhouse gas (GHG) emissions ― have announced or are contemplating some form of carbon neutrality target.

This number has soared in the last two years. In the "Special Report on Global Warming of 1.5 Degrees," adopted at the 48th Session of the Intergovernmental Panel on Climate Change General Assembly in October 2018, it was recommended that CO2 emissions be reduced by at least 45 percent compared to 2010 levels by 2030, and that carbon neutrality should be achieved by 2050.

The report served as the basis for Europe's declaration of carbon neutrality in 2019, followed by Japan and the United States declaring their respective targets of achieving carbon neutrality by 2050, in the second half of 2020. China and India also joined this rally, although their target years are farther ahead: 2060 and 2070, respectively. Against this backdrop, the term "carbon neutrality" is dominating conversations almost everywhere in the international community.

South Korea too pledged some important targets. Following its declaration of carbon neutrality on October 28, 2020, it established a 2050 Carbon Neutrality and Green Growth Commission under the Moon administration in May 2021, which reassessed the GHG emissions reduction target for 2030 and finalized the 2050 Carbon Neutrality Scenario.

The 2030 Nationally Determined Contribution, the government-set target to reduce GHG emissions, called for a 40-percent reduction of GHG emissions compared to the 2018 level, 727.6 million tons in total, which is a significant improvement compared to the previous reduction goal of 26.3 percent.

These efforts reflect the South Korean government's strong drive to push for carbon neutrality despite the country's substantial disadvantage compared to major advanced countries ― 26 percent of the South Korean economy is powered by the manufacturing sector. Thus, it is estimated that it will take 32 years from the peak level of emissions to reach a state of carbon neutrality, and the annual average reduction rate is only just above four percent.

The government's plan also includes various policies by sector, such as expanding the proportion of renewable energy power in the power generation sector to 30 percent, maximizing the reduction rate of emissions output in the industrial sector to 14.5 percent and increasing the supply of eco-friendly cars in the transportation sector to 4.5 million units. It also endeavors to further engage in hydrogen imports and the use of carbon capture, utilization and storage (CCUS) technology to capture, reuse and store carbon before it reaches the atmosphere.

The 2050 Carbon Neutrality Scenario serves as a compass to assess the country's direction and the pace of its transition to the state of carbon neutrality. Two scenarios have been finalized, and the only difference between the two is whether LNG power generation, internal combustion engines and fossil fuel hydrogen will stay on.

The main focus of the power generation sector is to stop coal power generation as well as come up with compensation packages. The industrial sector will switch to renewable fuel and materials, and the transportation sector will raise the penetration rate of zero-emission cars to at least 85 percent. Expanding the use of green hydrogen, carbon sinks and CCUS technology were also added to the to-do list.

The COVID-19 pandemic, which has completely changed our daily lives, has only reduced greenhouse gas emissions by five percent around the world. South Korea, as a country still centered on high-emission manufacturing industries, seems to have an uphill battle to achieve carbon neutrality.

However, given that this battle is unavoidable, perhaps the country can take it as an opportunity to thrive using its competitive assets. According to an announcement by McKinsey & Company in March, South Korea is at the top level of the world in terms of possessing the technical assets and human resources required to achieve the transition to carbon neutrality.

As of 2020, South Korea ranked in the top tier, in terms of the portion of R&D spending in the gross domestic product (GDP), the number of patents for climate change mitigation technology, and the percent of graduates with science and engineering backgrounds. While Japan, Germany, the U.S., and France are also known for their top technical assets, South Korea is a unique country that has talent as well as technology.

The 2050 Carbon Neutral Roadmap presented by the International Energy Agency (IEA) in May 2021 confessed that 50 percent of the technologies needed to achieve the carbon reduction target are still under development, indicating future opportunities. Moreover, temporarily, at the end of the last year, the EU carbon price rose above 90 euros per ton for the first time in history.

The surge in the price of carbon also previews a potentially lucrative future, since carbon prices above 80 euros per ton give a competitive edge to often expensive carbon reduction technology. Perhaps, this situation is why venture funds invested in eco-friendly technologies in 2020 to the amount of $17 billion ― three times the total amount of investment in the previous four years ― and their investments nearly doubled in 2021.

South Korea, which is not free from severe climate crises and international pressure to fight them, faces the goal of carbon neutrality despite not-so-favorable conditions compared to other advanced countries.

If South Korea can utilize its talents and technologies, however, the country will be able to enjoy (or even thrive along) its journey to carbon neutrality.

Kim Sung-woo (sungwoo.kim@KimChang.com) is head of the Environment & Energy Research Institute at Kim & Chang.