[Asia Exclusive] Han Jeong-ae, Minister of Environment, "Will Provide 50 Trillion KRW + α Policy Financing Over 10 Years for Corporate Green Transition"

Investment Needed for Corporate Just Transition to Achieve Carbon Neutrality by 2050
Estimated About 300 Companies with High CO2 Emissions
Korea Development Bank Supports Funding through Green Finance...Government Covers Interest Rate Difference
Eco-Friendly Efforts through Resource Circulation Also Recognized for Carbon Reduction...Plan to Actively Encourage by Reflecting in Evaluation System
Careful Decision Required as Price May Rise if Participating in 3rd Carbon Emission Trading Scheme

Environment Minister Han Jeong-ae is being interviewed by Asia Economy on the 9th. / Photo by Moon Ho-nam munonam@

[Interview = Asia Economy Chief Economic Reporter Choi Il-gwon, Summary = Asia Economy Reporter Joo Sang-don] "Companies need investment to achieve carbon neutrality. We will broadly support the indispensable costs involved."

Minister of Environment Han Jeong-ae, marking six months since her appointment, emphasized in an interview with Asia Economy that the government will actively support the fair transition of companies to realize carbon neutrality by 2050. Considering the burden on domestic companies with high carbon emissions, the government plans to expand policy financing.

The government intends to strengthen green finance for companies promoting fair transition, including ESG (Environmental, Social, Governance). Institutions such as KDB Industrial Bank will lend money to companies pursuing carbon neutrality, and the government will compensate for the difference between procurement interest rates and loan interest rates. The Industrial Bank’s carbon spread program, which offers interest benefits based on greenhouse gas reduction effect evaluations by external experts, will also be applied.

Regarding the scale of green finance support for companies, Minister Han said it will exceed '50 trillion won' over the next ten years. She stated, "Currently, there are about 300 domestic companies with high carbon dioxide emissions," adding, "We are planning to support them with long-term low-interest funds and have the government provide interest rate subsidies, and we are consulting with budget authorities."

The scope of green finance support will be as broad as possible. Minister Han said, "The EU’s ‘Green Industry Classification System (Taxonomy)’, ESG-related standards, and the priority of green fair transition desired by each company can be applied," adding, "If support targets are limited, the actual transition speed may slow down." This implies a comprehensive support approach using a negative list method.

Minister Han said, "To achieve the 2030 greenhouse gas reduction target (NDC), which is likely to be raised, companies must actively and aggressively transition their processes," and "Policy finance should also play a role comparable to the efforts of companies."

◇ Carbon Reduction Even Through Plastic Recycling = Minister Han plans to reflect eco-friendly efforts through resource circulation in the carbon neutrality evaluation system, in addition to financial support for the industrial sector. She announced plans to expand the carbon credit recognition method, currently being specified by the petrochemical industry, to other sectors such as cement.

She said, "Petrochemical companies recycle waste plastic and produce products using it as raw material," adding, "Since this ultimately leads to a reduction in crude oil imports, we are promoting recognition of this as carbon credits." Currently, research is underway with the Petrochemical Industry Association, and if an evaluation system is established, it will be applied to other industries.

Minister Han cited cement and steel industries as representative examples. She explained, "In steelmaking, using hydrogen reduction steelmaking or electric arc furnaces instead of coke (coal) in blast furnaces significantly reduces carbon dioxide emissions, which ultimately contributes to national carbon reduction, so this can be reflected in evaluations." Regarding the cement industry, she said, "We are considering switching to solid recovered fuel (SRF) made from waste synthetic resin or industrial and household waste instead of bituminous coal," adding, "If such efforts are institutionalized, they can be reflected in evaluations."

◇ The Final 2050 Carbon Neutrality Scenario May Be Stronger Than the Government’s Plan = Minister Han emphasized the government's plan to raise the 2030 greenhouse gas reduction target (NDC), stating, "An active target is necessary for future generations." The government previously announced a 24.4% reduction in carbon emissions by 2030 compared to 2017, but plans to raise the target ahead of the UN Climate Change Conference (COP26) in November.

She said, "If everyone says ‘Isn’t this difficult?’ then it can be considered a target," adding, "It is necessary to set bold goals from the start and implement related measures." She continued, "Providing good educational conditions for children is an effort to open more opportunities," and "Similarly, if we do nothing to prevent the climate crisis, future generations will not be able to bear it."

Therefore, she predicted that the ‘2050 Carbon Neutrality Scenario’ to be announced by the Presidential Carbon Neutrality Committee at the end of October could be stronger than the technical working group plan previously submitted by the government. Minister Han said, "The government plan was made by experts from national research institutes, so it had to reflect reality," but "The Carbon Neutrality Committee plan, which will incorporate more public opinions, may include different perspectives." With more diverse opinions reflected, a surprisingly feasible plan may emerge.

Regarding the reform of the carbon emissions trading system, she responded that the government is monitoring the market. She expressed caution about allowing third-party participation, as it could raise carbon credit prices and reduce the volume available in the market. Minister Han said, "Companies that need emission permits must buy them anyway, so third-party participation could be supported," but "If the volume secured by third parties is small and prices rise, and they withhold supply anticipating further price increases, the problem worsens." She added, "We will listen to industry opinions and decide on implementation."

She pledged to do her best to prevent damage to Korean companies from the EU’s carbon border tax, which is scheduled to be introduced in 2026. Minister Han said, "The EU’s carbon border tax is imposed because carbon emissions are not properly taxed, but we have a carbon emissions trading system that forms a market and imposes appropriate costs, so it could be double taxation," adding, "We will strive to have the EU accept this."

◇ Whether Nuclear Power Is ‘Green Energy’ Depends on EU Decision = Minister Han was reserved regarding criticism of the nuclear phase-out policy. Given the politically sensitive nature of the issue and her regulatory role, she must be cautious.

However, she is paying attention to recent nuclear power discussions within the EU. Since 2018, the EU has been developing a taxonomy to designate environmentally sustainable technologies and businesses to guide investors and financial institutions. When the taxonomy regulation was finalized in June last year, nuclear power was not designated as green energy due to disagreements among countries. In April, the EU Joint Research Centre, at the request of the European Commission, stated that "nuclear power is not more harmful to human health and the environment compared to other energy sources and is sustainable."

Minister Han said, "The designation of nuclear power as green energy has not yet been settled even within the EU," adding, "We will establish our own standards, but since the EU taxonomy will be globally recognized, it is not easy to create completely separate standards."

Regarding concerns that increasing the share of renewable energy will inevitably raise electricity prices, she said, "In the UK, where offshore wind has a high share, electricity prices are actually cheaper than when coal-fired power was dominant," adding, "Judging by current standards is not appropriate, just as solar power generation efficiency has rapidly improved."

Interview by Chief Economic Reporter Choi Il-gwon

Summary by Reporter Joo Sang-don