[Budget Focus] The Decisive Battleground for Greenhouse Gas Reduction...Will the Zero-Emission Vehicle Subsidy Program Succeed?

Higher Targets Despite Sluggish Electric Vehicle Distribution
Budget Office: "Budget Allocation Fails to Reflect Reality"
Reduced Budget for Low-Floor Hydrogen Buses

The Lee Jaemyung administration has finalized the national greenhouse gas reduction target (NDC) for 2035 at 53-61% compared to 2018 levels. This is a more ambitious plan than the government's previously proposed reduction targets of '50-60%' and '53-60%'. The government has announced that it will present the 'K-Green Transition Promotion Strategy' by the first half of next year in line with the 2035 NDC.

According to budget analysis data from the National Assembly Budget Office released on the 13th, the government reported a total of 347 greenhouse gas reduction-related projects to the National Assembly, allocating a budget of 1.1956 trillion won with the goal of reducing approximately 5 million tCO₂eq (tons of carbon dioxide equivalent). The 'Zero-Emission Vehicle Supply Project,' which provides subsidies for the purchase of eco-friendly vehicles such as electric and hydrogen vehicles, aims to reduce greenhouse gas emissions by 801,761 tCO₂eq. This is the second largest reduction among all greenhouse gas reduction projects. (The largest reduction comes from the 'Support for Eco-Friendly Consumption and Low-Carbon Production Base Construction' project, which provides incentives for activities such as reducing household energy use, cutting down driving distances, and issuing electronic receipts.) The government has allocated a budget of 2.2825 trillion won to the 'Zero-Emission Vehicle Supply Project,' which includes the promotion of electric and hydrogen vehicles.

The issue is whether the actual level of support set in the budget can be achieved.

Over the past three years, the supply of electric passenger cars and electric trucks has been sluggish. In 2023, the number supplied was 118,841 units (78,014 electric passenger cars and 40,827 electric trucks), and in 2024, it was 105,110 units (85,840 electric passenger cars and 19,270 electric trucks). As of August this year, only 51.0% of the electric passenger car budget and 42.4% of the electric truck budget had been executed. Despite this situation, next year's budget aims to supply 177,500 units.

The government has continuously reduced subsidies for electric vehicle purchases. The pace of subsidy reduction has outstripped the expansion of electric vehicles, which has delayed the increase in supply. The government plans to provide a subsidy of 3 million won for electric passenger cars and an additional 1 million won as an internal combustion vehicle conversion incentive for those who replace and scrap their existing internal combustion engine vehicles when purchasing an electric car.

The National Assembly Budget Office stated, "Given the lackluster support performance this year, the allocation of volume and budget for next year's internal combustion vehicle conversion incentive may not have sufficiently reflected the actual conditions for execution." It also pointed out the need to prioritize support for replacing older, high-emission vehicles and to consider whether hybrid cars should be included as eligible for the internal combustion vehicle conversion incentive.

There are also calls for improvements regarding the hydrogen vehicle supply project. Despite demand from local governments for hydrogen buses, the budget for low-floor hydrogen buses in next year's budget has been reduced by 32.8%. An official from the National Assembly Budget Office commented, "By reducing the supply volume and budget for low-floor hydrogen buses, the actual supply trends and local government demand for hydrogen vehicles have not been accurately reflected."