Ultra-low 1.3% Interest for Carbon Reduction Investments... Government to Provide 80 Billion Won in Loans

"Carbon Neutral Transition Leading Project" Announced
Up to 50 Billion Won Per Project

The government will provide a new loan program totaling 80 billion won for companies that make preemptive investments in greenhouse gas reduction facilities and research and development (R&D). Selected companies will be able to raise funds at an annual interest rate of 1.3%, up to 50 billion won per company (with R&D funds capped at 10 billion won).

On the 24th, the Ministry of Trade, Industry and Energy announced that it will accept applications until April 10 for companies seeking support under the "2026 Carbon Neutral Transition Leading Project Loan Support Program." The measure is intended to accelerate the transition to low-carbon industrial processes and to back large-scale private investments in greenhouse gas reduction.

This program is open not only to small and medium-sized enterprises (SMEs) and mid-sized companies, but also to large corporations. The loan interest rate will be calculated by subtracting 2 percentage points for SMEs and mid-sized companies, and 1.5 percentage points for large corporations, from the loan rate of the Public Capital Management Fund loan account for the third quarter of each year. As of February this year, the applicable rate is 1.3%, which is the lower limit.

In particular, additional points will be given to sectors where carbon reduction investment is urgently needed and to companies linked to key policy initiatives. Six industries subject to the European Union (EU) Carbon Border Adjustment Mechanism (CBAM) (steel, aluminum, cement, fertilizers, electricity, and hydrogen), companies whose business restructuring plans have been approved under the "Special Act on Corporate Vitality Enhancement," and companies selected for the pan-government "Net Zero Challenge X" initiative led by bodies such as the National Council on Climate and Air Quality will receive 2 extra points in the selection and evaluation process.

According to the Ministry, from 2022 through last year this program provided 850.9 billion won in loans to 95 projects, including low-carbon facility upgrades and technology development. It explained that this served as seed funding that led to 3.2056 trillion won in new private investments in carbon neutrality.

Lee Minwoo, Director General for Industrial Policy at the Ministry of Trade, Industry and Energy, said, "With the establishment of the ambitious 2035 Nationally Determined Contribution (NDC) for greenhouse gas reduction, the burden on industry is growing, but investment in the low-carbon transition is a path we must take to implement carbon reduction and secure industrial competitiveness," adding, "We will strengthen policy support by preparing sector-specific carbon reduction implementation roadmaps for industries such as steel and petrochemicals and by pursuing the enactment of the Industrial Green Transformation (GX) Promotion Act."