South Korea

The Government of the Republic of Korea, which has one of the most energy intensive industrial structures in the world, recently unveiled its 2050 Carbon Neutral Strategy (December 2020), which lays forth the vision of achieving carbon neutrality by mid-century. The announcement comes on the heels of the publication of the Korean New Deal, the governments response to the COVID-19 crisis and which includes several measures and funding streams to support green growth projects as well as digital transformation. In addition, South Korea recently submitted its updated Nationally Determined Contribution (December 2020) which replaced its previous interim submission. The new NDC includes an absolute mitigation target of 24.4% below 2017 levels of GHG emissions by 2030, replacing the previous target which was set against a business as usual (BAU) scenario. The new target, although an improvement compared to the previous NDC submission, is less ambitious than targets put forward by other developed countries and are not in line with limiting global warming to 1.5 degrees above pre-industrial levels. For instance, current targets put South Korean on an emissions trajectory 19% below 2010 levels. However, it is noteworthy that the Korean government recently announced that it will share the additional and more ambitious plans to reduced its GHGs emissions in the second of 2021 and might further enhance its ambition after a new administration comes into power after the Presidential election in April, 2022. (Please note Korea maintains one time 5 year fixed term for each President under its Consitution.) The countrys carbon neutral strategy is supported by a sound policy and legislative framework to support a transition to a sustainable economy. For instance, the Framework Act on Low Carbon Green Growth, passed in 2010, set a foundation for subsequent policy action and prescribes the implementation of a National Green Growth Strategy, a Basic Plan on Climate Change and a Basic Energy Plan that must be updated every five years. A Presidential Committee on Green Growth, composed of government officials as well as private sector experts, oversees implementation of these diverse green economy plans. Recently, the Government has announced to further strengthen its institutional and legal arrangements to support its plans to realize the Policy on the 2050 Carbon Neutrality policy. It is also expected that Republic of Korea may further strengthen its institutional and legal arrangements after the Presidential election in April, 2022. However, there is also a risk that depending on which candidate wins, there may be a weakening in the existing institutional and legal arrangements.

The government of Korea has made recent initial efforts to include a more robust and inclusive public participation process in the legislative process as featured in the development of the countrys 2050 Vision. For instance, while historically the policymaking and legislative process in South Korea has been very top-down, featuring few opportunities for meaningful public input and participation has become very significant. During the current administration, at some points, key posts within the government including but not limited to the Secretary to the President on Climate Change and Environment, the Minister and Vice of the Ministry of Environment, and key members of National Assembly in terms of submitting drafts of the relevant legislation were all members of Civil Society organizations. In particular, reporting line of the secretary of climate change and environment is under Senior Secretary of Civil Society within the President Office until April 2021 when the reporting line of the secretary of climate change and environment to the Senior Secretary to the President on Job Creation. The run-up to the drafting of Koreas 2050 carbon neutral vision is an example of recent advances in this area together with developing national government policies and legislation. The process featured a 2050 Low-carbon Forum to gather input forum private sector experts as well as online surveys and public consultations with a diverse set of stakeholders. This phenomenon became significantly popular in crossing the sector while some concerns being raised in terms of adequate participation of private sector and experts. Despite this, there are still areas such as gender equality which require equal participation as demonstrated in the Global Gender Gap Report (2021). Recently, the country has begun focusing more on gender inclusive governance, having formed a Ministry of Gender Equality in 2001 as an independent government ministry to oversee policies for enhancing womens rights and gender equality. The Ministry is tasked with conducting Gender Impact Assessment on government policies and has introduced gender responsive budgeting practices. In terms of employee participation in corporate governance, it is not a legal requirement that employees can elect a board member of listed companies and rarely occurs in the South Korean context.

The government of South Korea has been an active player in the promotion of the SDGs among private sector business in the country. The Korean Ministry of Environment has led the establishment of SDGs tailored to the South Korean context, known as the K-SDGs. A separate task-force representing each SDG was formed, comprised of government officials, private sector experts and academia, to draft the K-SDG framework. The framework includes goals, targets and implementation tasks. In this context, the Korea Business Council for Sustainable Development (KBCSD) was designated as the Focal Point of the K-SDGs and is responsible for advocating its use among its over 200 member companies. As part of this process, KBCSD has partnered with the Ministry of Environment and South Koreas Committee on Sustainable Development to set up a technology platform to help private companies integrate the SDGs into their strategic and operational planning processes. In addition, Recently, the Korean government also introduced the policies on ESG (Environment, Social and Governance) which promotes private sectors to comply with voluntary/regulatory standards. Yes, more needs to be done to heighten awareness of "SDGs" among the general public, in terms of the concept and philosophy, even if "sustainability" has garnered visibility and attention in both the public and private sectors.

South Korea has been experimenting with the use of non-economic national wealth indicators for the past several decades, although their use remains somewhat marginal. Focused primarily in the environmental domain (natural accounts), for instance in the early 2000s, the Korean Ministry of the Environment developed the Korean System of Integrated Environmental and Economic Accounting (KORSEEA). Several years later it developed the NAMEA system, by which environmental accounts, including information on environmental indicators in relation to economic activities were integrated into the countrys national accounts. However, there has been few additions / updates to this system over the past decade.

South Korea has been active in terms of green finance promotion in recent years. The government convened a Green Finance Taskforce and has announced plan to create a taxonomy to distinguish between green and brown industries and activities, modelled after the recent European Commission initiative and intended to facilitate the adoption of sustainability policies and processes in the Korean finance sector. The country first launched a green finance plan in 2009 and has complemented that with the development of an environmental information disclosure system in 2013, and an emissions trading scheme (ETS) in 2015. The government also launched the Korea stewardship code in 2016, in an attempt to encourage the sustainable investment options of institutional investors in 2016. While the government has attempted in recent years to activate the green and sustainable finance market in South Korea, uptake by the private sector has been slow and as such, the green finance market in the country remains small compared to developed peer countries. The recent push by the South Korean government to propel the proportion of renewables in the countrys energy mix and reduce its heavy reliance on coal electricity generation are expected to incentivize the green finance market going forward as funding needs are significant to propel this transformation. In addition, the government launched the enVinance system, which offers financial institutions the corporate environmental information that it collects according to the Framework Act on Low-Carbon Green Growth, as a means to incorporate preferential environmental screening in financing decisions. More recently, the Korean government is preparing for K-taxonomy to promote further sustainable financing.

South Korea has taken a lead in the use of government resources, policy instruments and legislation to drive capital flows towards green businesses, products and activities. For instance, South Korea recently issued a 500 million USD sustainability focused sovereign bond. In addition, several government departments and entities have made strides in recent years in promoting green monetary instruments. The Korea Land & Housing Corporation has obtained certification as a qualified social green bond issuer and has issued 500 million USD in a social green bond offering. Similarly, the Korea Electric Power Corporation (KEPCO) recently issued a green bond worth USD 500 million. In addition to the bond market, the government of South Korea has also implemented other lending facilities, fiscal incentives and direct public procurement initiatives to drive the green market. For instance, the Ministry of the Environment provides a subsidized loan service from a state-managed environmental fund for investments in clean energy projects. The government has also set up several tax break schemes to promote green investments. However, the governments recent decision to continue subsidies and economic support to brown industrial giants in the wake of the COVID-19 crisis, most notably Doosan Heavy, a key builder of coal power stations, signals the country is not yet ready to commit all its resources to key future looking green industries. However, the government recently announced to stop financing overseas coal power plants and shutting down 20 coal power plants by 2034. In terms of green public procurement, South Korea has been a pioneer, leading the way in the use of electronic procurement systems and platforms to promote the use of governmental spending in order to promote sustainability goals. The country Act on Promotion of Purchase of Green Products (2005), requires that all government agencies and government entities submit an annual green purchasing implementation plan. Although it is based on voluntary targets an annual performance report is generated for all government levels.

South Korea's central bank routinely performs stress testing on financial, economic, market and interest rate risks faced by the countrys financial institutions. Like most of its developed peer nations, the Korean banking regulator does not incorporate climate-related risks in its structured stress testing process.

However, according to the deliberations of its Green Finance Taskforce, plans are underway to develop a climate risk management and oversight plan for financial institutions (to monitor and disclose risks themselves) and to "further assess whether to incorporate climate risk factors into the regulation and supervisory frameworks of the countrys banking sector".

During 2022 the Bank of Korea commenced a pilot scenario analysis exercise on climate-related pysical and transition risks, and the chairman of the Financial Services Commission has indicated South Korea's intention to introduce climate stress testing in the future.

South Korea launched an emission trading scheme (ETS) in 2015 following inclusion in the Framework Act on Low-Carbon Green Growth (2009) of language stipulating the introduction of a cap and trade mechanism to curtail GHG emissions. The ETS was formalized via the approval in 2012 of the Act on the Allocation and Trading of Greenhouse Gas Emission Permits and had an initial pilot phase (2015-2017) that included 252 companies. Companies with 3-year average GHG emissions of over 125,000 tCO2e or facilities with 3-year average GHG emissions of over 25,000 tCO2e are designated to participate in the trading scheme. Phase 2 of the implementation of the ETS (2018-2020) introduced an auctioning scheme to emission allocations (previously, the participating companies were given emissions allowances free of charge). Phase 3, which began in 2021 and set to last until 2025, has set targets and allocation in line with South Koreas commitments included in their most recent NDC submission. South Korea's ETS maintains comprehensive coverage and deals with both direct and indirect emissions.

South Korea`s 2050 Carbon Neutral Strategy includes a vision of how key sectors in the countrys economy, including energy, industry, transportation, buildings, waste, and agriculture will achieve the stated mission of becoming carbon neutral by mid-century. While lofty in language and ambition, the document lacks details and specifics as to how these sectors will achieve carbon neutrality. Such detail is provided, albeit in a much shorter timescale and with more muted ambition in South Koreas recently adopted 2030 GHG roadmap. In it, the government details sector-specific reduction targets as well as policy measures to achieve the 2030 emissions reduction target outlined in its recent NDC submission. South Koreas sectoral GHG reduction strategy is further bolstered by the Emissions Trading Scheme, which includes on a mandatory basis companies from 23 subsectors that emit nearly 70% of the countrys greenhouse gases.

Although the concept of social enterprises did not gain traction in South Korea until the late 1990s or early 2000s, since then the government has created a solid policy and legislative framework to support the stability and growth of both social and green enterprises. For instance, with the passage of the Social Enterprises Promotion Act in 2007 (since amended in 2013), South Korea became the first Asian nation to legally stipulate the conditions and qualifications for social enterprises. The legislation also incorporated a number of policies to support and to promote these businesses, including wage subsidies, training and preferential treatment in government procurement processes. The act includes a specific certification system for social enterprises that calls for the businesses meeting several criteria to be categorised officially as a social business, including a decision making structure that involves stakeholder input and having specific social goals. Certified social enterprises are eligible for wage subsidies, business development assistance, consulting services, and subsidies for the purchase of equipment For green enterprises, there exists a separate certification process that received statutory support via the passage of the Environmental Technology and Industry Support Act and is operated by the Ministry of the Environment. In addition, the government of South Korea operates several initiates that aim to support financially and through in-kind services the survival and growth of green enterprises. For instance, the Ministry of Environment has created an Environmental Venture Fund to identify and support interesting environmental stat-ups. Similarly, the Environmental Technology Business Incubator (ETBI) was established under the supervision of the Korea Institute of Environmental Science and Technology to assist promising environmental ventures.

South Koreas recently submitted update to its Nationally Determined Contribution (December 2020) commits the country to a limit of 536 MtCO2eq in 2030, representing a 24.4% decline from 2017 levels. Contrary to the emissions reduction target in South Korean initial NDC submission in 2015 which was based on a comparison with a business as usual scenario, this latest objective is an absolute emissions reduction target, a method preferred by climate change experts. The emissions reduction target included in South Koreas NDC has been given a legal basis via its inclusion in the Enforcement Decree of the Framework Act on Low Carb on, Green Growth. Similarly, the updated target has been incorporated into the 2nd Basic Plan for Climate Change Response and is being used to set allocation standards for the planned 3rd Phase of the countrys Emissions Trading System (ETS). This Phase 3 Allocation Plan for the period 2021-2015 specifies the emissions caps as well as allocation methods for participating sectors based on the principle of contributing to meetings the emissions reduction target set out in the NDC. During this phase of operation, the ETS is expected to include companies that account for over 70% of South Koreas CO2eq emissions. While these carbon limits are enshrined in South Koreas legislative framework, the established targets are deemed to be substantially insufficient to meet the target of limiting temperature increases to 1.5 above pre-industrial levels.

While successive South Korean governments have championed the concept of green or low carbon growth over the past decade, the nations economy continues to be driven by energy-intensive industries, powered primarily by fossil fuels. Coal, largely imported, remains the pillar of South Koreas electricity generation system, accounting for approximately 27% of the countrys electricity generation. In addition, the country is a major investor in overseas coal powered energy plants. Nuclear energy is a major player in South Koreas energy mix, accounting for 19% of electricity generation with 24 nuclear reactors in operation. Renewable sources account for 15% of the countrys electricity generation. Efforts to decarbonise South Koreas very energy intensive economy have been slow, although recent policy and legislative advances are pointing the country in the right direction. The recently unveiled 2050 Carbon Neutral Strategy calls for the total phase out of coal plants or their conversion to liquefied natural gas. In addition, the Strategy calls for a significant ramp up of the countrys renewable energy projects. For instance, the recently drafted 9th basic energy policy for the years 2020-2034 calls for raising the share of renewable energy out of its power generation to 40 percent by 2034 from the current 15.1 percent. The plan also stipulates the closure 60 coal-powered plants would be exempted of all coal-fired power plants whose 30-year operational life cycles expire by 2034.Recently the Korean government revealed its plans to phase out old coal-powered plants earlier than scheduled and also to stop financing overseas coal power plants. While much publicity has been given to the governments stated goal of 30-35 percent renewable energy by 2040, practical implementation will only be possible with an increasing reliance on LNG as coal plants are replaced. At the point of use, LNG generates far less greenhouse gases and air pollution than coal, but the problem is that through the production process, large amounts of methane, which is a greenhouse gas 25 times more potent than carbon dioxide, is released into the air. The govt. faces criticism that it is buying gains in domestic air quality at the cost of long-term environmental losses. South Koreas Renewable Portfolio Standard (RPS) in effect since 2012 requires major electric utilities to increase their renewable and new energy share in the electricity mix to 10% by 2023. The new energy provision has been heavily criticised by environmental groups as it includes sources that are not renewable, including coal-fired integrated gasification combined cycle, fuel cells and industrial waste incineration. Despite these recent advances in the promotion of renewable energy, the current targets are deemed by experts to be insufficient with a 1.5 C-consistent pathway.

In response to several recent economic crises, the government of South Korea has turned to the notion of green jobs as a way to spur economic growth and job creation in line with the countrys aspirations to decarbonise its economy. For instance, in the wake of the financial crisis of 2008, the government unveiled an ambitious Plan to implement the Green New Deal Project for the Creation of Jobs, which aimed to create nearly 1 million jobs in nine key projects linked to environmental outcomes. However, the Plan ran into several obstacles, most notable the inclusion of the Four Major Rivers Restoration Project as a major component of the job creation. This project was by many civil society organisations. The Pan fell short of the targets and was subsequently discontinued. More recently in response to the economic crisis created by the COVID-19 pandemic, the government of South Korea has unveiled a retooled Green New Deal, which calls for an investment of 12.9 trillion won ($10.5 billion) over the next two years, with the focus on the creation of 133,000 jobs. To reach this job creation target, the Plan includes retrofitting public buildings, creating urban forests and increasing the scale of recycling projects. The ambition of the latest iteration of a green jobs plan is more muted and there is a lack of detail in terms facilitating the transition of people from brown to green industries. In addition, details of the plan released thus far do not indicate strategies for including socially vulnerable groups in the jobs strategy.

Long touted as an example of the effects of strong economic growth as a means to poverty alleviation, South Korea has in recent years experienced growing problems related to rising inequality and social exclusion. A very high life expectancy rate coupled with a weak public pension system and relatively low government spending on social protection systems has seen a rapid rise in poverty rates among the elderly in South Korea. According to recent statistics published by the OECD for instance, South Korea registers the highest relative poverty rate of people aged over 65 among the OECD countries. The survey data suggested that nearly half of South Koreas elderly were in poverty (defined as earning 50% or less of median household income). Poverty alleviation and the reduction of income inequality figure prominently in South Koreas 2016 National Voluntary Review. In addition, while the document cites links between these poverty alleviation goals and the environmental strategies and plans developed in recent years by the government (for instance when listed relevant government policies in the area of SDG 1 to end poverty, three of the five documents listed are environmental in nature) a review of these document does not reveal clear and specific linkages between the countrys environmental strategies and the poverty alleviation efforts.

The concept of participatory policymaking became more widespread in South Korea during the administration of former President Roh Moo-hyun (2003-2007) who promoted the Participatory Government initiative in order to increase the level of citizen involvement in the policy-making process. During his tenure, the Presidential Commission on Sustainable Development was established to lead the countrys response to the Agenda 21 process and was intended to include non-governmental actors in the national policy making process. A similar participatory approach was featured in the development of the countrys recent unveiled 2050 Carbon Neutral Strategy. The process featured a 2050 Low-carbon Forum to gather input forum private sector experts as well as on-line surveys and public consultations with a diverse set of stakeholders. However, similar to past initiatives to promote participatory policy-making, the ultimate decision-making process remained limited to a small number of actors with a limited voice in terms of representation of the full range of citizen perspectives. Other notable initiatives to expand the level of citizen participation in public governance includes a mandatory citizen participation program in local governments that resulted from the passage of the Local Finance Act in 2011. On the hand, it is also noteworthy in the fields of sustainable development, climate change and environment, many of high level positions within the government including but not limited to the President Office, and Ministry of Environment, many of the positions were filled with ones from civil society organizations. This has led to over-representation by the civil society in top-level government decision makings. As an example, the Commission on Carbon Neutrality (77 members in total) has been criticized for having as members exclusively those supporting the government's position on carbon and energy issues, a majority of which are NGO and environmental activists at the expense of energy sector specialists (ten). Carbon neutrality is a national issue of bipartisan/nonpartisan importance, yet the government does not seem interested in forging a national consensus, which is crucial for the countrys bid to transition away from coal and nuclear energy to be successful, in light of the enduring popularity of nuclear energy and continued heavy reliance on coal in the current energy mix.

South Korea is facing several important and at times related social and economic challenges that include rising inequality, a steadily ageing population, and rapidly rising poverty levels among the countrys growing elderly population. All this is occurring in the context of a country with relatively low social spending (among the lowest in the OECD) and an insufficient public pension system. President Moon`s recent electoral victory was based in part on promises to address some of these growing social issues. In response he has pledged, among other initiatives, to increase the number of job openings for older and to increase social housing provision for elderly people. However, for the most part, the initiatives fall into traditional patterns of social support, showing little in the way of innovative thinking for solving these social problems. As an example, in the most recent Voluntary National Submission document to the UN High Level Political Forum (HLPF) for Sustainable Development the government highlights the increases in the use of tax subsidies as a means of helping the working poor out of poverty. More importantly, South Korea recently provided non-conditional cash payments to the public in the middle of addressing adverse impact of COVID19 and continued to provided non conditional cash payments for the targeted poor and adversely affected small and medium sized business sectors. It is worth noting as well, that there are few linkages between these anti-poverty programs and the countrys ambitious vision for creating a carbon neutral economy in the next several decades.

In Jan 2016, South Koreas third National Basic Plan for Sustainable Development was adopted to adapt the Sustainable Development Goals to the national context. Updated every five years, the plan outlines 14 strategic targets around four goals including: healthy land, integrated and safe society, inclusive creative economy and global prosperity. The Korean Sustainability Development Goals were established in 2018 to complement the Basic Plan for Sustainable Development. Of the 151 implementation tasks included in the document, 80, or more than half were related to environmental issues. As a peninsula, protection of marine resources, occupies a significant place in the countrys SDG planning an implementation. The issue has gained in prominence in recent years due to severe overexploitation in the fishery sector. In this respect, South Korea banned the ocean disposal of land wastes in 201, while the third National Basic Plan for Sustainable Development includes several goals related to controlling coastal pollution. In addition, South Korea has taken steps to reduce marine litter via the passage of a 5-year National Marine Litter Management Plan. The third National Marine Litter Plan, developed in 2018, includes more comprehensive policies on marine litter. The Marine Environment Management Act establishes protected areas and sets a target to minimise marine acidification. In terms of land conservation, South Korea has an extensive policy and legislative framework that includes the Natural Environmental Protection Ac and the Forest Protection Act. The K-SDG 15 target aims to expand land area with protected status and the countrys forest area in line with the Fourth National Biodiversity Strategy (2019-2023).

Although South Korea has been experimenting with the use of natural capital indicators for several decades, their use in the governmental planning and decision making process does not appear to be very relevant. For instance, in the early 2000s, the Korean Ministry of the Environment developed the Korean System of Integrated Environmental and Economic Accounting (KORSEEA). Several years later it developed the NAMEA system, by which environmental accounts, including information on environmental indicators in relation to economic activities were integrated into the countrys national accounts.

Although South Korea has developed the Korean System of Integrated Environmental and Economic Accounting (KORSEEA) as well as the NAMEA system, by which environmental accounts, including information on environmental indicators in relation to economic activities are integrated into the countrys national accounts, there is not a formal, independent body that oversees the development of the natural accounting methodologies and techniques or validate the results of the accounting process.

South Korea has taken some initial steps to align the taxation and spending functions of the government with long-term sustainability goals. For instance, the government has established several tax incentives to promote green investments. These include tax incentives for energy efficiency investments for the replacement of old industrial kilns, the installation of energy-saving facilities, the installation of alternative fuel-using facilities and of other facilities reducing energy consumption by more than 10 %. In addition, South Korea was an early adopter of feed-in tariffs to promote the adoption of renewable energy technologies. Specifically, the Electricity Business Law mandated both the purchase and the fixed price of electricity generated from renewable sources, meaning that any renewable energy generator that is connected to the grid is eligible to sell electricity to the grid at a fixed price. The feed-in tariff structure has since been replaced with renewable portfolio standard, which requires major electric utilities to meet renewable and new energy targets, aiming to increase their share of electricity generation to 10% in 2023. On a negative note, despite these advancements in the use of the tax code for achieving sustainability goals, the government of South Korea continues subsidizing and supporting large industrial conglomerates in polluting industries. A recent example is the bailout given in the wake of the COVID 19 crisis to Doosan Heavy, a key builder of coal power stations. In addition to tax incentives, the government of South Korea utilises its power of the purse to pursue environmental goals. For instance, South Korea has been a pioneer, in green government procurement and was an early adopter of the use of electronic procurement systems and platforms. The Act on Promotion of Purchase of Green Products (2005), for instance, requires that all government agencies and government entities submit an annual green purchasing implementation plan.