[Exclusive] Incentives Promised to Increase... 'Carbon Neutrality Point Benefits' Reduced Due to Budget Issues

Suddenly Reduced 'Carbon Neutrality Points'
Ministry of Economy and Finance Cuts Budget Citing 'Duplicate Payments' Issue
"Energy Sector Incentives Almost Completely Eliminated"

The Ministry of Environment has been confirmed to have reduced incentives for the ‘Carbon Neutrality Points’ program. This is because the Ministry of Economy and Finance cut some of the incentive budget, citing overlapping systems. Criticism has arisen that the sound fiscal policy stance is negatively affecting climate crisis policies. In particular, it is pointed out that this move dampened the carbon neutrality policy, which is seeing an increase in users at a time when national efforts to reduce greenhouse gases are urgently needed.

According to the Ministry of Environment on the 23rd, benefits under the Carbon Neutrality Points system were partially reduced starting from the 7th of this month. The Carbon Neutrality Points system is a policy that awards points, which can be used like cash, based on the reduction rate of greenhouse gases. It began in 2009 under the name ‘Carbon Points System’ to promote an energy-saving culture throughout society, and has been implemented under its current name since January 2022.

The Ministry of Environment decided not to provide ‘complex-specific participation incentives’ from this month. Previously, complexes with high greenhouse gas reduction rates received maximum points. Apartments and schools had enjoyed these benefits, but from this year, they will no longer receive them. The ‘below standard usage’ incentive also disappeared due to changes in regulations. The government had been awarding points when individuals used electricity, water, or city gas at 50% or less compared to the average to encourage energy saving.

The removal of incentives was influenced by the Ministry of Economy and Finance’s revision of this year’s budget. The Ministry of Economy and Finance raised concerns about duplicate payments. They judged that the complex-specific participation incentives overlapped with individual incentives and that the motivational effect was not significant. The below standard usage incentive was eliminated because its calculation method was similar to the Ministry of Trade, Industry and Energy’s ‘Energy Cashback.’ Energy Cashback awards 30 to 100 won per kWh depending on the reduction segment if electricity consumption is reduced by more than 3% compared to the average monthly consumption of the previous two years. However, to receive benefits, the reduction rate must be higher than the overall average. Since the Ministry of Environment also set the benefit condition at ‘50% compared to the average,’ the logic is that the two systems are essentially the same.

It is known that during discussions on the Carbon Neutrality Points budget, there was even talk of completely eliminating the energy sector. A Ministry of Environment official said, “The Ministry of Economy and Finance said that since Energy Cashback exists, energy-related policies should be handled by the Ministry of Trade, Industry and Energy and Korea Electric Power Corporation, not the Ministry of Environment,” adding, “Due to conflicts with the Energy Cashback system, the energy sector within the Carbon Points system almost got completely cut.” He also added, “To prevent this, we accepted many proposals from the Ministry of Economy and Finance.”

The Ministry of Economy and Finance denies having raised issues with the incentives of the Carbon Neutrality Points system. A Ministry of Economy and Finance official said, “We probably did not discuss the Carbon Neutrality Points system in detail, pointing out specific issues one by one,” and rebutted, “That may be incorrect information.” Regarding the content exchanged during the budget drafting process, they declined to comment, saying, “You should inquire with the Ministry of Environment.”

Climate Budget Falls Short of Targets... Benefits for Carbon Neutrality Points Participants Likely to Decrease

Criticism has been raised that the government’s sound fiscal policy stance is hindering climate crisis response efforts. The climate budget was not sufficiently secured as this year’s budget increase rate was set at 2.8%, the lowest in 20 years. According to data analyzed by Jang Hye-young, a Justice Party lawmaker on the National Assembly’s Special Committee on the Climate Crisis and Special Committee on Budget and Accounts, this year’s climate crisis response budget is 14.5181 trillion won. This is 2.7233 trillion won (15.8%) less than the 17.2414 trillion won target set in the national carbon neutrality basic plan for this year. Of the total 458 projects, 329 (71.8%) fall short of their originally targeted budgets. About half of the projects (231) were allocated less than last year’s budget.

In the case of the Carbon Neutrality Points system, the overall budget has increased, but this is largely due to the increase in participants. The operating budget for the Carbon Neutrality Points system was raised from 2.45 billion won in 2022 to 8.9 billion won this year. The total budget for this year reaches 14.77 billion won. This is because the number of users increased from 259,000 in the first year of implementation to 1.04 million as of December last year. Although it is a popular policy with participants increasing nearly fourfold in one year, the benefits that citizens actually receive have decreased.

This contradicts the ‘2030 Greenhouse Gas Reduction Target’ announced in March last year. At that time, the government stated it would encourage carbon reduction participation not only from the public sector but also from businesses and civil society. To this end, it promised to expand incentives for the Carbon Neutrality Points system. Since incentives for reduction activities are currently limited, the strategy also included plans to expand the scope of incentives to decarbonize all aspects of citizens’ lives.

A Ministry of Environment official explained, “Since Energy Cashback was introduced but the Carbon Neutrality Points system is still maintained, the actual benefits to the public have not decreased,” adding, “No significant opinions were raised during the administrative notice process.”