July, 24th, 2018- The Ministry of Environment (Minister Kim Eunkyung) announced that ‘the Revised Roadmap to Achieve the National GHG Reduction Target for 2030’ and ‘the Second Stage Plan for National Greenhouse Gas Emission Permit Allocation during the Second Planning Period’ were finalized at the cabinet meeting on July 24th.

The two plans were made to reflect the government’s goals, including better management of fine dust and energy conversion, and to improve the capacity for achieving the greenhouse gas reduction target*, which the government promised to international society.

* To cut carbon emission to 536 million tons by 2030 (a 37 percent reduction based on the business as usual, or "BAU" level)

(※ Business as usual (BAU): An estimation of future greenhouse gas emissions assuming no additional reduction efforts besides current policies.)

To modify the roadmap, the government assembled a joint experts group from industry, government and academia, and the group made the first draft in June of this year.

The group gathered and reflected the opinions of the general public through various online and offline channels, including three open hearings, collecting the opinions of stakeholders, and a dedicated webpage (http://www.2030ghg.or.kr).

The recently finalized roadmap was revised to increase the domestic reduction targets in each sector while maintaining the total reduction target that was announced in 2015. The main goal of the revision was to minimize the amount of overseas reductions, which accounted for 30 percent, or 96 million tons of the total reduction target.

The Second Stage Plan for the National Greenhouse Gas Emission Permit Allocation during the Second Planning Period sets the cap of greenhouse gas emission for the companies subject to emission trading permits* for the next three years, from 2018 to 2020, based on the recently revised draft of the roadmap. Also, the plan sets the standard for allocating the permits to each business entity.

* The companies that surpass 125,000 tons of annual greenhouse gas emissions from 2014 to 2016, or have facilities that surpass the 25,000 tons of annual emission

The plan was created through a continuous gathering of opinions from related industries, civil society organizations and experts from January to July of this year as well as a reviewing process of the Permit Allocation Committee (chaired by the Deputy Prime Minister of Strategy and Finance).

It was meaningful that the new plan has created an overall framework to improve the first plan of last year and operate the emission-trading scheme from 2018 to 2020.

< The Roadmap to Achieve the National GHG Reduction Target for 2030 >

The main focus of ‘the Revised Roadmap to Achieve the National GHG Reduction Target for 2030’ is to enhance the possibility of achieving the emission reduction target that Korea pledged to international society.

First, each domestic sector will increase the reduction amount of greenhouse gas emission by 58 million tons, to 277 million tons through various methods, including better energy demands management, efficient energy use, and nurturing low carbon industries. (Previous plan: 25.7 percent of the BAU level → new plan: 32.5 percent of the BAU level)

The energy conversion sector (power generation, group energy) reflected energy conversion policies by fine dust reduction and the use of eco-friendly energy, confirming 24 million tons of emission reduction. And the sector will create a detailed plan to reduce another 34 million tons before submitting the Nationally Determined Contribution (NDC) to the UN in 2020 by establishing a third basic energy plan, revising the energy tax framework, and enhancing the dispatch of environmental power.

Industry sector will reduce 99 million tons through the revision of industrial processes, energy use reduction, and sharing of good emission cutting technologies.

The construction sector will reduce 65 million tons through tightened energy standards for new buildings, and the promotion of green-remodeling for existing buildings.

The transportation sector will reduce about 31 million tons through the introduction of 3 million electronic vehicles by 2030 and the expansion of eco-friendly public transportation.

In addition, 11 million tons of greenhouse emission is planned to be reduced through waste reduction, the promotion of recycling, and the tightened greenhouse gas emission and energy use target management system in public sectors, and about 10 million tons is planned to be reduced through carbon capture, utilization, and storage (CCUS) technologies.

38.3 million tons of emission (4.5 percent of the BAU level), which was difficult to reduce through domestic reduction plans, is planned to be reduced through forest carbon sinks and overseas reductions, but the detailed plans will be made according to the follow-up negotiations of the Paris Agreement.

Finally, other emission-cutting methods, such as joint projects between the two Koreas, including forest restoration in North Korea, and the building of infrastructure to establish the hydrogen economy, will also be reviewed continuously.

Unlike the previous roadmap, which set a single reduction target for 2020, the new roadmap has set three milestones for a term of three years.  

Currently, Korea’s greenhouse gas emission is on the rise. Therefore, the will of the government is also reflected in the new plan, involving a de-coupling between economic growth and greenhouse gas reduction after 2020, following the examples of other developed countries.

< The Second Stage Plan for National Greenhouse Gas Emission Permit Allocation during the Second Planning Period (2018 ~ 2020) >

The second allocation plan set the cap of total greenhouse emissions during 2018 to 2020 at 1,777,130,000 tons for the 591 companies under the emission trading permit system.

Compared to the first plan, the second plan added an additional amount of emissions due to the expansion in number of the facilities under the permit system and the increased factors of emission.  

Among the total national emission cap, the portion of companies under the emission trading permit system (based on direct emission) also increased to 70.2 percent in the second plan from 68.0 percent in the first plan.

Accordingly, the cap of total greenhouse emissions in the second plan slightly increased from 1,689,860,000 tons in the first plan, from 2015 to 2017, which was applied to 526 companies.

In terms of sectors, 762,530,000 tons was given to the energy conversion sector, including power generation companies, 942,510,000 tons to the industrial sector, and 72,090,000 tons to other sectors, including buildings, transportation and waste.

Among the total emission cap during the second plan, the pre-allocation amount for the companies is 1,642,980,000 tons, which requires the companies to reduce 5.6 percent of the previously emitted amount.

Additionally, there is 134,150,000 tons of reserve emission amount in the plan. The amount will be allocated to new facilities that will be built during the period of the second plan.

Finally, 19 million tons of extra emission amount out of the total emission cap will be prepared to secure liquidity in the emission scheme trading market and to deal with emergency situations, such as emission scheme price hikes.

The second plan introduced a paid allocation system for the first time. Among 63 types of business, 26 businesses, including power generation companies, will be allocated 97 percent of the total emission cap for free, and the remaining three percent will be allocated at a cost through auction and other methods.

However, the other 37 businesses*, which have potential risks in international trade or in production costs from the paid allocation system, will be allocated 100 percent of the total emission cap for free this time as well.

* 1. A type of business, the international trade intensity of which is at least 30 percent;
2. A type of business, the production costs incurrence rate of which is at least 30 percent;
3. A type of business, the international trade intensity and production cost incurrence rate of which are at least 10 percent and at least five percent, respectively.
(Article 14 of the Enforcement Decree of the Act on the Allocation and Trading of Greenhouse Gas Emission Permits)

< Future action and support plans from the government >

Through the new revised roadmap implementation plan and the revenue from the paid allocation, the government will create a modified plan of 'the First Climate Action Basic Plan' by December this year. The plan will include a support plan to provide emission reduction facilities for SMEs and mid-sized companies.

Also, based on the allocation plan, the government will receive emission permit
submissions from individual companies in August, and allocate the rights by the end of October.

"The revised reduction roadmap and the new allocation plan were created through a continuous gathering of opinions from industries, civil society organizations and experts from September of last year," stated Kim Younghun, the head of the Climate Change Policy Bureau at the Ministry of Environment.

"For a while, companies and the general public found the new plans burdensome. But in the long term, the new policies will be a chance to establish a sustainable low carbon economy that will bring new growth engines to our economy and society." With such statements, Mr. Kim requested active participation and support for the government’s effort toward greenhouse gas reduction.