Joseyeon "Discussions on Carbon Tax Introduction Must Be Intensified... 'Carbon Neutral Finance' Also Needs Review"

Editorial Column of the November Issue of the Finance Forum

Professor Hong Jong-ho, Graduate School of Environmental Studies, Seoul National University (Former President of the Korean Association of Public Finance)

[Sejong=Asia Economy Reporter Son Sunhee] A suggestion has been made that discussions on the introduction of a carbon tax at the tax system level should be intensified to respond to the climate crisis.

Professor Hong Jong-ho of Seoul National University Graduate School of Environmental Studies (former president of the Korean Association of Public Finance) argued in the lead column of the November issue of the Fiscal Forum published by the Korea Institute of Public Finance, a government-funded research institute, on the 30th, "The entire tax system imposed on fossil energy, including the existing individual consumption tax and transportation, energy, and environmental taxes, should be fundamentally reviewed based on carbon content."

Professor Hong explained the background, saying, "Climate change is the greatest negative externality in human history," and "Since scientists have identified the causal relationship between greenhouse gases and climate change over the past decades, it is time for public finance scholars to actively propose solutions."

He cited an International Monetary Fund (IMF) report proposing a 'global carbon price floor' that imposes differentiated carbon taxes according to each country's circumstances, and said, "Professor Robert Pindyck of MIT argues that if a carbon tax of around $200 per ton of carbon dioxide is not imposed, climate disaster cannot be prevented."

Professor Hong added that it is necessary to consider 'carbon-neutral finance' not only in terms of introducing a carbon tax but also in fiscal management.

He emphasized, "The European Union (EU) has established a 'Just Transition Fund (JTF)' worth 40 billion euros to support industries, companies, and workers that have lost competitiveness in the decarbonization process," and "To minimize socio-economic conflicts arising from the green transition and move toward an inclusive society, fiscal roles like the JTF are essential." He also reminded that among the Biden administration's $1.75 trillion social investment plan recently passed by the U.S. House of Representatives, climate change-related investments account for the largest share ($555 billion), and reiterated, "We must closely examine the implications of the EU and U.S. policy directions linking climate, economy, and finance for our country's fiscal management."

Professor Hong pointed out, "The climate crisis and carbon neutrality are tremendous challenges and new opportunities for Korean society and the Korean economy," and "The world demands responsible decarbonization policies befitting Korea's status as the world's 10th largest economy." He concluded the column by saying, "There needs to be a national consensus on the seriousness of climate issues and the necessity of response," and "The role of public finance scholars in creating effective tax and fiscal policies to secure Korea's carbon competitiveness is crucial."