[Weekly Review] Far Future Carbon Neutrality and Hydrogen Are 'Rosy'... But Ordinary People Now Shed 'Tears of Blood'

Unlike the Industry's Rosy Blueprint

Small Business Owners and Self-Employed Suffer
Government Sets Loss Compensation Recognition Rate at 80%

Inflation Concerns Grow... "Prices Will Rise in October"

On the 8th, a self-employed person held a press conference in front of the Government Seoul Office in Jongno-gu, Seoul, urging the relaxation of quarantine measures and compensation for losses of self-employed individuals. Photo by Jinhyung Kang aymsdream@

[Sejong=Asia Economy Reporter Moon Chaeseok] The government announced a national greenhouse gas reduction target (NDC) plan to reduce greenhouse gas emissions by 40% by 2030 compared to 2018 levels. This raises the reduction target by more than 13 percentage points compared to the previous goal. To revitalize the hydrogen economy, domestic hydrogen usage, currently at about 200,000 tons per year, will be increased to 4 million tons by 2030. Separately from the 'sudden acceleration' of industrial policy, the government faced backlash by uniformly applying an 80% damage recognition rate for loss compensation to self-employed and small business owners hit hard by COVID-19, regardless of business restriction periods. Due to the impact of overseas raw material supply, prices are expected to continue rising for the time being.

Carbon Neutrality 'Sudden Acceleration'

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is delivering opening remarks at the 'Deputy Prime Minister-Economic Organization Heads Meeting' held on the 8th at the Chamber Lounge of the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

The Presidential Committee on Carbon Neutrality 2050 disclosed on the 8th an NDC upgrade plan to reduce carbon emissions to 436.6 million tons by 2030. This means a 40% reduction (291 million tons) compared to the 727.6 million tons of carbon emissions in 2018. To achieve this, greenhouse gas emissions must be reduced by 4.17% annually until 2030.

The business community opposed this. The Korea Chamber of Commerce and Industry pointed out, "With only eight years left, raising the NDC to 40% raises serious concerns about feasibility." The Korea Employers Federation also stated, "Excessive NDC upgrades not only weaken corporate competitiveness but are highly likely to cause serious side effects such as production cuts, overseas relocation, contraction of related industries, and job losses."

Declaration to "Expand Hydrogen Economy"

President Moon Jae-in speaking at the Hydrogen Economy Achievements and Hydrogen Leading Nation Vision Report held on the 7th at the planned investment site of Hyundai Mobis Hydrogen Fuel Cell Plant in Seo-gu, Incheon. (Photo by Yonhap News)

Along with this, the government declared it will realize the 'hydrogen economy' through comprehensive support including technology, taxation, and finance. President Moon Jae-in said at the 'Hydrogen Economy Achievements and Vision for a Hydrogen Leading Nation' event held on the 7th at the planned site of Hyundai Mobis hydrogen fuel cell factory in Cheongna, Incheon, "We will strongly promote making South Korea a leading nation in clean hydrogen as a core future strategy."

The government's goal is to expand annual hydrogen usage from 220,000 tons this year to 3.9 million tons by 2030. The target for 2050 is 27 million tons. The proportion of clean hydrogen that emits no carbon dioxide will be raised to 50% by 2030 and 100% by 2050. Additionally, 30 global hydrogen companies will be nurtured by 2030.

To this end, the government plans comprehensive support such as expanding tax credits for new growth and core technologies, increasing policy finance including overseas development loans and guarantee support. They also aim to create 50,000 jobs related to the hydrogen economy during the same period by establishing specialized university and graduate programs in hydrogen.

Loss Compensation for Self-Employed and Small Business Owners "80% Damage Recognition Rate"

As non-face-to-face classes continue due to COVID-19, the worries of merchants in university commercial districts are deepening. On the 8th, the commercial area near Ewha Womans University in Seodaemun-gu, Seoul, appeared quiet due to the lack of students visiting. Photo by Kang Jin-hyung aymsdream@

While pouring out 'rosy' industrial policies regardless of feasibility, the government pulled out the card of 'uniform application of 80% damage recognition rate' for loss compensation for self-employed and small business owners. Although there are counterarguments about the fiscal burden, there is a general consensus that self-employed people, who hold a large share in the Korean economy, cannot be left out, so it was impossible to avoid backlash from those who expected '100% compensation.'

The Ministry of SMEs and Startups held a loss compensation review committee on the 8th and approved the third-quarter loss compensation criteria including this content. It supports small enterprises under the Framework Act on Small and Medium Enterprises that suffered losses due to gathering bans and business restrictions from July 7 to the 30th of last month. Regardless of the degree of gathering bans and business hour restrictions, an 80% damage recognition rate is applied.

Small business owners argue that since they suffered fatal damage due to government administrative orders, the government should rightfully compensate 100% of losses. The Korea Federation of Small and Medium Business Associations criticized in a statement, "We cannot hide our disappointment with the 80% loss compensation plan, which differs from full compensation."

'Adding Insult to Injury' Inflation Concerns... "Prices Will Rise in October"

Lee Eok-won, First Vice Minister of the Ministry of Economy and Finance, presides over and speaks at the policy review meeting and the vice ministers' meeting on prices held at the Government Seoul Office in Jongno-gu, Seoul on the 8th. (Photo by Ministry of Economy and Finance)

From the perspective of ordinary people, prices are expected to rise as an added misfortune. The government officially acknowledged, "Prices will rise further in October."

Lee Eok-won, First Vice Minister of Strategy and Finance, held a policy review meeting and a price-related vice ministers' meeting at the Government Complex Seoul on the 8th and said, "This month's consumer price inflation rate will be higher than last month's 2.5%." However, regarding the cause, he explained, "This is due to high uncertainty from rising international oil prices, global value chain (GVC) disruptions, and global inflationary pressures."

Amid growing concerns about 'greenflation,' where raw material prices rise due to eco-friendly policies such as Carbon Neutrality 2050, the government also plans to check domestic stockpiles including reserves and monitor international energy prices and supply-demand trends in real time.

Regarding the GVC issue, Vice Minister Lee said, "If prolonged, it could delay global economic recovery and increase inflationary pressures. Our economy seems to be only limitedly affected by GVC disruptions except for vehicle semiconductors and some overseas local production, but we will maintain special vigilance and respond proactively."