South Korea, as the world’s 13th-largest greenhouse gas (GHG) emitter, is a pivotal nation in the global effort to tackle climate change and advance clean energy solutions. Comprising 1.35 percent of global GHG emissions and emitting 654 million tons in 2022 alone, the government faces significant domestic pressure to align its policies with the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius. The steel industry, a cornerstone of South Korea’s manufacturing prowess, bears a substantial share of the responsibility, as it accounts for a staggering 40 percent of the nation’s industrial GHG emissions and 16.7 percent of total national emissions. There is an urgent need for decisive action to decarbonize this sector and transition toward more sustainable practices.
Under its nationally determined contribution (NDC), South Korea has pledged to reduce total national GHG emissions by 40 percent by 2030 compared with 2018 levels; this falls short of the Paris Agreement’s 1.5 degrees Celsius temperature goal. Climate Action Tracker estimates that South Korea must achieve a domestic emissions reduction of at least 59 percent by 2030 to satisfy this threshold. This gap highlights the imperative for the government to set bolder and more ambitious climate policies, particularly as the Republic of Korea (ROK) and all other governments now prepare to update and submit by next February their 2035 NDC pledges.
An opportunity for change
A recent change in South Korea’s national-level political landscape presents a window of opportunity for change in ROK climate policy. In the lead-up to the April 2024 elections, the Democratic Party (DP) campaigned on a platform that committed to making climate action one of the top three priorities on its agenda, with a strong focus on accelerating the renewable energy transition. The DP scored a decisive electoral victory, expanding its majority within the National Assembly by 19 more seats, securing 175 seats compared with the People Power Party’s (PPP) 108 seats.
The DP has pledged more ambitious climate policies, including plans to phase out coal-fired power plants by 2040 and to boost renewable energy production to 40 percent by 2035. Notably, the DP has declared its intent to enact a Carbon Neutrality Industry Act, modeled after the United States’ Inflation Reduction Act (IRA).
The DP has pledged more ambitious climate policies, including plans to phase out coal-fired power plants by 2040 and to boost renewable energy production to 40 percent by 2035.
Following the dismal electoral results for his PPP, President Yoon Suk-yeol demonstrated his willingness to engage in dialogue with DP opposition leader Lee Jae-myung on governance matters. This shift represents an opportunity for the DP to more aggressively advocate for clean energy policies.
The path forward: Bilateral engagement on NDCs and lessons from the Inflation Reduction Act
As South Korea’s Ministry of Trade, Industry and Energy (MOTIE) prepares to update the ROK’s NDC as well as its 11th Basic Energy Plan (BEP), the United States has a significant opportunity, as South Korea’s closest ally, to support its progress on climate action. Recognizing that U.S. President Joe Biden and South Korean President Yoon will have a wide-ranging agenda when they meet next on the sidelines of the Washington NATO summit, they should continue to keep climate action on the leader-level agenda. The presidents should prioritize policy and technical discussions on strengthening their NDCs and fostering collaboration on clean energy technologies such as batteries and hydrogen.
The presidents should prioritize policy and technical discussions on strengthening their NDCs and fostering collaboration on clean energy technologies.
To further this agenda, U.S. Senior Adviser for International Climate Policy John Podesta and ROK Minister of Environment Han Wha-jin ought to lead engagements on NDC ambitions and explore potential areas for collaboration, ensuring that high-level dialogue on climate action continues beyond presidential meetings. In advancing such a dialogue, it will be important to consider certain unique aspects of South Korea’s energy landscape, including President Yoon’s strong commitment to nuclear power and the influential role and the interests and influence of large conglomerates (chaebols).
Moreover, legislative exchanges between the U.S. Congress and the ROK National Assembly could play a valuable part in shaping a tailored program to tackle climate change. The DP’s proposed Carbon Neutrality Industry Act could serve as a core element of how South Korea advances a more ambitious NDC goal. Building a robust U.S.-ROK dialogue on lessons learned from the IRA process, while adapting it to South Korea’s unique economic and political landscape, could help inform the ROK’s NDC goal setting. Members and staff from the key committees that worked on the IRA—the Senate committees on Energy and Natural Resources and Finance as well as the House committees on Energy and Commerce and Ways and Means—could lead this engagement with National Assembly members and staff who are beginning work on the Carbon Neutrality Industry Act.
The chairs and ranking members of these committees could spearhead a U.S.-ROK Climate Action Parliamentary Exchange initiative to foster direct communication and knowledge sharing between legislators from both countries. An exchange would provide a platform to discuss best practices, explore policy adaptations, and align climate action strategies between the United States and South Korea. It could explore various policy avenues:
- Innovation and research and development (R&D). Mirroring the IRA’s emphasis on clean energy research, South Korea could boost public funding, including tax breaks or grants, to spur private sector investment in clean energy R&D. Despite the fact that South Korea is the world’s sixth-largest steel producer, the ROK government has allocated only $193 million (268.5 billion Korean won) for low-carbon steel production R&D, much lower than the allocations of other top steel-producing countries. For instance, Germany, which has half the production volume of Korea, invests about 38 times more in government support to promote steel decarbonization. Focusing on areas crucial to Korea’s energy transition, such as steel decarbonization, clean hydrogen production, and advanced battery storage, could yield tangible benefits.
- Investment and tax incentives. Similar to the IRA’s approach, South Korea could increase its producer and consumer tax credits to drive steel decarbonization and battery manufacturing, as well as production and consumer adoption of renewable energy and electric vehicles. Offering a more streamlined set of subsidies for these industries would align with the nation’s unique energy needs.
As mentioned earlier, steel industry decarbonization should be a high priority. The ROK could offer additional tax credits to facilitate the transition from blast furnace to hydrogen-based steel production to address the significant cost challenges associated with this crucial shift. To support these efforts, the U.S. Department of Energy could share insights with South Korea about its Industrial Heat Shot initiative to bolster steel decarbonization efforts.
- Social justice and equity. Ensuring a just transition for workers in the coal and gas power sectors has to be a key consideration, both for equity and fairness as well as for sustaining the political and public support for a clean energy transition. South Korea could work with unions and provincial governments to implement retraining programs, direct investments to communities reliant on these industries, and provide financial assistance to low-income households adopting clean energy technologies.
- International cooperation. South Korea is the second-largest G20 country to publicly finance overseas fossil fuel projects. Historically, South Korean public and private financial institutions have been significant financiers of coal and other fossil fuel projects, particularly in developing countries. A critical area where the United States can drive strengthened South Korean climate action is in encouraging the National Assembly to reassess the government’s posture in this area, as this practice is increasingly at odds with global climate goals and the urgent need to transition away from fossil fuels.
Building on existing cooperation
The United States and South Korea already have a foundation of cooperation on climate and clean energy issues upon which to build. Both countries are part of the Indo-Pacific Economic Framework (IPEF) Clean Economy pillar, which aims to establish shared standards and mobilize investment to drive the transition to clean energy sources. The legislative and executive exchanges proposed above present an opportunity to operationalize and expand the IPEF’s goals through concrete policy mechanisms. Moreover, by leveraging the IPEF Clean Economy pillar as a showcase for U.S.-ROK collaboration, both countries can influence the ambition of other regional partners’ climate policies.
Additionally, South Korean companies have already benefited from IRA incentives. For example, LG Energy Solution and SK On are investing billions of dollars to expand electric vehicle battery production in the United States. Likewise, Hyundai is building its first dedicated electric vehicle and battery manufacturing facility in Georgia. Just this past April, LS Cable & System welcomed a $99 million IRA Section 48c investment tax credit to create a U.S. manufacturing facility to build submarine power cables. A South Korean version of the IRA could similarly drive increased private sector investment into the ROK’s clean energy manufacturing sector, bolstering economic opportunities while advancing climate goals.
By embracing bold climate policies and clean energy solutions, South Korea can position itself as a leader in the fight against climate change, while fostering economic opportunities and energy independence.
Conclusion
South Korea, as an Organization for Economic Cooperation and Development (OECD) member country and a regional economic powerhouse, serves as an economic and energy role model in the Indo-Pacific, especially for countries in emission-heavy Southeast Asia and where South Korea has been active in fossil fuel project financing. By embracing bold climate policies and clean energy solutions, South Korea can position itself as a leader in the fight against climate change, while fostering economic opportunities and energy independence. The DP’s clean energy agenda is an opportunity to elevate the ROK’s leadership on this front.
The United States, as South Korea’s closest ally, should seize this political opportunity to engage with and support the latter’s efforts through executive and legislative exchanges. Such collaboration not only aligns with the global imperative of combating climate change but also reinforces the United States’ strategic interests in the Indo-Pacific region.