[The Editors' Verdict] Climate Change Response Trapped in a Dilemma

One of the biggest topics for governments and companies around the world this year is climate change. The outbreak of COVID-19 made the world realize the seriousness of global warming and empathize with the need to respond to climate change.

Countries are presenting aggressive targets to reduce greenhouse gas emissions. Europe has officially announced a goal to reduce greenhouse gas emissions by 55% compared to 1990 levels by 2030. Last month, the Japanese government revealed plans to reduce the share of fossil fuels in power generation from the current 76% to 41% by 2030.

Companies are also rushing to adopt ESG (Environmental, Social, and Governance) management, and the financial sector is joining in. Central banks around the world, including the U.S. Federal Reserve (Fed), have identified climate change as one of their important policy goals. Meanwhile, discussions on the introduction of a carbon border tax, which could directly affect Korean companies, are also active. Europe recently formalized the Carbon Border Adjustment Mechanism (CBAM) through its 'Fit for 55' plan, and the United States is reportedly considering legislation on a carbon border tax, mainly led by the Democratic Party.

On the surface, it seems that the whole world is moving in unison toward the single goal of addressing climate change. However, the reality is not so simple.

The British economic weekly The Economist pointed out in a recent issue that "despite the grand discourse, fossil fuels are increasing." According to data from the International Energy Agency (IEA), global energy demand is expected to increase by about 5% this year. A 4% increase is also anticipated next year. Approximately 45% of this additional demand this year is expected to be met by electricity generated from fossil fuels.

The main reason is the significant increase in energy demand as major economies such as the United States, Europe, and China have reopened their economies with expanded vaccine rollouts this year.

According to Citigroup, Europe's natural gas reserves are at their lowest level in the past five years. China, which relies heavily on coal power, is also experiencing a significant increase in electricity consumption this year. According to the U.S. Energy Information Administration, the share of coal in U.S. electricity use is expected to rise from 22% last year to 26% this year.

There is also a paradoxical situation where eco-friendly policies are actually encouraging the use of fossil fuels. The Wall Street Journal (WSJ) reported that Western countries such as the U.S. and Europe are expanding solar power facilities, but due to high dependence on Chinese components, this has paradoxically not led to a reduction in greenhouse gas emissions. This is because China, which dominates the global solar market, mainly uses coal power to lower production costs.

Recent wildfires spreading worldwide due to abnormal weather conditions are once again reminding us of the seriousness of climate change. Wildfires caused by scorching summer heat have started in North America and spread to Southern European countries such as Spain, Greece, Italy, and Turkey, severely damaging forests and polluting the atmosphere. There are concerns that if this vicious cycle continues, climate change could reach an uncontrollable state.

Although countries appear to be actively responding to climate change on the surface, their true intentions differ slightly. At the G20 Environment Ministers' Meeting held last month in Italy, discussions were held on abolishing subsidies for fossil fuels and gradually reducing coal use, but the meeting ended without much progress due to opposition from China, India, Russia, and Saudi Arabia.

Korea, which has long heavily depended on fossil fuels for energy, is also in a difficult situation. It is time for wise policies that can keep pace with the global trend of responding to climate change while minimizing damage to companies and promoting economic growth.