"Increase in Coal Power Generation Tax" Five Cities and Provinces Including Chungnam Urge Amendment of Local Tax Act

A view of the coal-fired power plant located in Taean, Chungnam. Source=Asia Economy DB

[Asia Economy (Naepo) Reporter Jeong Il-woong] “To ensure that residents who have suffered for 90 years due to thermal power generation receive compensation and that the public’s right to health is guaranteed, the Local Tax Act amendment must be promptly processed.” Calls for an increase in the thermal power generation tax rate are growing louder.

On the 22nd, according to Chungnam Province, the governors of five cities and provinces?Chungnam, Jeonnam, Gyeongnam, Incheon, and Gangwon?recently adopted a joint petition regarding the increase of the thermal power generation tax rate and delivered it to the Speaker of the National Assembly, the National Assembly’s Public Administration and Security Committee, the Prime Minister’s Office, and the Ministry of the Interior and Safety.

In the joint petition, the five cities and provinces pointed out that thermal power generation accounts for more than half of the country’s power generation, and despite the significant direct and indirect social costs borne by the local areas operating thermal power plants, the local resource facility tax rate is set relatively lower than that for nuclear power. They also emphasized that the low tax rate ultimately increases the burden on local governments.

In particular, these cities and provinces argued that air pollutants from thermal power generation adversely affect the health of nearby residents and cause external costs such as air and water pollution and a decline in property values around power plants.

According to a 2016 study by the Gyeonggi Research Institute, the five participating cities and provinces in the joint petition bear social costs amounting to approximately 17.2 trillion KRW annually due to thermal power generation.

Additionally, foreign studies have found that the external costs of thermal power generation are between 1.6 times and 143.7 times greater than those of nuclear power.

Contrary to this situation, the five cities and provinces claim that the local resource facility tax rate for thermal power generation is only 0.3 KRW per 1 kWh, which is just 30% of the nuclear power tax rate of 1.0 KRW per 1 kWh.

Typically, the local resource facility tax is levied and secured as funds for the restoration and prevention of environmental pollution damage in affected areas, but the core issue is that thermal power generation, which causes more external costs, is taxed at a lower rate than nuclear power.

Accordingly, the five cities and provinces pointed out, “Thermal power generation forms the foundation of South Korea’s economic development, but on the other hand, it imposes direct and indirect damage on local areas and residents through large amounts of dust, fine dust, odors, nitrogen oxide emissions, and environmental accidents.”

They also stated, “Local governments are making efforts on their own to restore and prevent damage caused by thermal power generation, but due to poor local financial conditions, securing related budgets is difficult.”

They added, “The unfairness of applying different tax rates depending on the power source must be improved,” and said, “We respectfully submit this petition, containing the wishes of 11.81 million residents of Chungnam, Jeonnam, Gyeongnam, Incheon, and Gangwon, urging the prompt processing of the Local Tax Act amendment, which centers on raising the thermal power generation tax rate to secure funds for compensating residents’ damages and creating an environment where they can live healthy lives.”

Meanwhile, in the 21st National Assembly, Democratic Party lawmaker Eo Gi-gu proposed an amendment to the Local Tax Act to raise the thermal power generation tax rate from 0.3 KRW per 1 kWh to 2 KRW, while People Power Party lawmakers Kim Tae-heum and Lee Myung-soo each proposed raising it to 1 KRW.