"Industrial Ecosystem on the Brink of Collapse"... Industry on High Alert Over Government's 2035 NDC (Comprehensive)

"Obsession with 'Targets' Ignores On-the-Ground and Technological Realities"
"Wave of Bankruptcies Feared for SMEs Unable to Adapt to Industrial Transition"
From Automobiles and Parts to Steel and Petrochemicals, Industry in Panic

The government has unveiled its Nationally Determined Contribution (NDC) target to reduce greenhouse gas emissions by 50-60% compared to 2018 levels by 2035, triggering alarm across the industrial sector. Although the industry had anticipated that the government would set 50% as the lower limit, there is growing criticism that the finalized target focuses solely on setting ambitious numbers, disregarding on-the-ground realities and technological conditions.

Within the industrial sector, there is a growing sense of crisis that the ecosystem could collapse as regulatory standards are heightened and the pace of industrial transition accelerates under the proposed NDC targets. Uncertainty also remains, as the specific emission reduction allocations for each industry segment have yet to be determined.

On November 6, the Ministry of Climate, Energy and Environment held a public hearing on the 2035 NDC and presented a final candidate range of either a '50-60%' or '53-60%' reduction compared to 2018. This is a much more ambitious target than the 2030 goal of 40%, representing the highest reduction level ever set, and is being assessed as making structural adjustments inevitable across virtually all industrial sectors.

Public Hearing on the 2035 National Greenhouse Gas Reduction Target (2035 NDC) held on the 6th at the National Assembly Members' Office Building in Yeouido, Seoul. Photo by Yonhap News

The automotive industry expressed some relief that the government lowered its initial target of making 90% of new cars electric or hydrogen-powered by 2035 to 70%. However, industry representatives still pointed out a significant gap between this target and current realities. In particular, the government's decision not to recognize hybrids as zero-emission vehicles has fueled dissatisfaction. One automaker representative commented, "If hybrids are excluded, only electric vehicles remain. With subsidies shrinking and consumer demand stagnant, relying solely on electric vehicles to keep pace with the government's timeline introduces enormous business uncertainty."

The shock of structural transition is expected to start from the bottom of the industrial pyramid. There are concerns that small and medium-sized parts suppliers, which will have difficulty adapting to the industrial transition, will be hit the hardest. According to the Korea Auto Parts Industry Promotion Foundation, 45% of domestic parts manufacturers still primarily produce components for internal combustion engines, and the rate of transition to future mobility businesses is less than 20%.

A representative from the parts industry stated, "The impact of tariffs hasn't even fully materialized yet, but if we follow the government's electrification timeline, many companies will shut down within five years. In the current environment, where even securing bank loans is difficult, let alone investing in new facilities, survival three years from now-not ten-has become the pressing issue."

The steel industry is also in a state of panic. The government's target of reducing emissions by at least 1.5 million tons through hydrogen-based steelmaking by 2035 is being criticized as misaligned with the expected timeline for commercializing the technology. A steel industry representative said, "Hydrogen-based steelmaking is expected to become commercially viable around 2037, so achieving a 48% reduction before then is impossible. Ultimately, the only option is to artificially cut production, which is essentially the same as telling us to halt factory operations."

According to the Korea Iron & Steel Association, the additional emissions allowances needed by two major domestic steelmakers between 2026 and 2030 will amount to 51.41 million tons. If the price per allowance rises to 50,000 won, the cost burden will reach approximately 2.57 trillion won. Another industry official warned, "If the emissions trading scheme is strengthened and reduction targets are raised simultaneously, cost pressures will skyrocket from next year, which could undermine our competitiveness in the global market."

The petrochemical industry has already reached its limits. An industry representative said, "The market is deteriorating and restructuring pressures are mounting. If additional reduction obligations are imposed, it will be impossible to endure. CCUS (carbon capture, utilization, and storage) technology is still at the pilot stage, yet the government is demanding immediate commercialization."

The aviation industry is also concerned about the cost explosion associated with expanding the use of sustainable aviation fuel (SAF). An airline industry official stated, "International flights are already regulated under the International Civil Aviation Organization's (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), but as SAF usage increases, fuel costs will inevitably surge."

While the government's 2035 NDC target is an unavoidable choice to address the climate crisis, the reality facing the industrial sector is harsh. This is because the entire manufacturing sector-including automobiles, parts, steel, petrochemicals, and aviation-will confront regulatory requirements at a pace far exceeding the commercialization of relevant technologies or the development of market conditions.

The Korea Chamber of Commerce and Industry, representing the business community, stated, "The government's 2035 NDC proposal and the fourth emissions trading allocation plan will place a significant burden on industrial competitiveness. It is necessary to set realistic and reasonable targets that consider both carbon reduction and industrial competitiveness." The chamber added, "To achieve these reduction targets, not only must companies make technological development efforts, but the government must also provide financial support, expand infrastructure, and improve systems. Active policy support from the government is essential."