Current Policy Projections
Between 1990 and 2014, South Korea's emissions more than doubled. Emissions steeply increased in the early 1990s, with growth then continuing at a slower pace, and the CAT projects that GHG emissions growth will continue to slow. Actual emissions levels in the period 2010–2014 were above the BAU projections from the Third National Communication.
South Korea is one of the countries with the fastest growing emissions in the OECD. The high export rates from South Korea’s manufacturing industry play a critical role in South Korea’s increasing emission levels (Kim et al., 2015). In other developed Asia-Pacific Economic Cooperation (APEC) economies such as the US, Australia or Canada, energy consumption per capita is projected to decline as economies shift towards the service sector and improve energy efficiency. However, South Korea is an exception: energy per capita is expected to continue to rise (and even overtaking the United-States after 2035) as industrial energy use increases and population declines (APERC, 2016; United Nations, 2017).
Currently implemented policies are estimated to lead to an emissions level of 746–761 MtCO2e/year in 2030 (150–155% above 1990 levels), excluding emissions from land use, land use change and forestry (LULUCF). To reach its 2030 NDC target, South Korea will have to strengthen its climate policies.
Estimated emissions for the five major industries (including power generation) are projected to increase by 1.3 percent in 2018 (Ecoeye International, 2018). To reduce sectoral emissions, South Korea introduced the GHG and Energy Target Management System (TMS) in 2012, which was a precursor to the Emissions Trading System (ETS) and covered 60% of total emissions. The TMS still covers emitters consuming significant amounts of energy that are not covered by the ETS. As a result of TMS operations, 65 companies collectively reduced their emissions by 0.74 MtCO2e/year in 2015 compared to business-as-usual (Republic of Korea, 2017b). Introduced in 2015, the ETS manages 69% of the national GHG emissions and covers more than 600 companies from 23 sub-sectors (Republic of Korea, 2017b) from steel, cement, petrochemicals, refinery, power, buildings, waste and aviation sectors; this includes all installations in the industrial and power sectors with annual emissions higher than 25 ktCO2e. The ETS system includes both direct and indirect emissions (emissions from electricity use).
In Phase I (2015–2017) of the ETS, all allowances were freely allocated (IETA, 2015). Energy-intensive and trade-exposed sectors will receive free allowances for all their emissions in all three phases. In Phase I, the plan was to decrease the absolute emissions cap from 573 MtCO2e/year in 2015, to 562 MtCO2e/year in 2016 and 551 MtCO2e/year in 2017 (Carbon Market Watch, 2015). In addition to the overall cap, the ETS also sets sectoral caps that reflect sectoral-based emissions reduction targets (ICAP, 2016). The sectors were selected based on the size of their contribution to the country’s overall emissions. They were expected to play an important role in meeting South Korea’s former target of reducing emissions to 30% below the baseline by 2020, with sector-wide reductions ranging from 17.5% for waste to 34.3% for transport.
As of June 2016, 524 liable entities out of 525 successfully submitted permits for compliance. A total of 539 MtCO2e was allocated to the entities and they emitted a total of 543 MtCO2e demonstrating that the plan functioned quite well (GIR, 2017). The cap for Phase II (2018–2020) of the ETS was announced in July 2018 and is set to increase by 2.1% compare to Phase 1. In this new phase, 97% of the allowances will be allocated for free and the remaining 3% will be auctioned. For Phase 3, 10% of allowances are set to be auctioned (Ministry of Environment, 2018).
In the recently adopted revised 2030 GHG roadmap, South Korea provides details on sector-specific reduction targets as well as policy measures to be further encouraged. For the building sector, the plan mention strengthening permit standards for new buildings, promoting green renovation, identifying new circular business models, and expanding renewable energy supply. For the industry sector, the plan focusses on energy efficiency and industrial process improvements measures but also on the promotion of eco-friendly raw materials and fuel (Ministry of Environment, 2018). Those planned measures are not considered in our current policy projections.
In 2015, the electricity and heat sector represented 52% of national CO2 emissions from fuel combustion. South Korea’s power demand increased by 162% over the period 1990–2013 and is dominated by coal-fired (43% in 2015) and nuclear generation (30% in 2015) (IEA, 2017).
In 2012, South Korea introduced a Renewable Portfolio Standard (RPS), replacing a previous feed-in tariff scheme. The new standard obliges suppliers to meet annual generation targets from renewable and new energy, with the objective to increase renewable and “new energy” share from 2% in 2012 to 10% in 2024 (IEEJ, 2014). In 2015, renewables represented 7.7% of the electricity generation (IEA, 2017), ahead of the RPS target for that year, without taking into account the share of coal-fired Integrated Gasification Combined Cycle (IGCC) plants (which are also considered “new energy” and therefore included in the initial government target). Given its current very low deployment, IGCC is likely to play a very minor role in electricity generation.
In December 2017, the South Korean government released a new 15-year “Plan for Electricity Supply and Demand” (or 8th Plan) that confirms its intention to shift electricity generation away from coal and nuclear towards more renewables (Ministry of Trade, Industry and Energy, 2017a). Specifically, the 8th Plan includes an objective to increase the share of renewable electricity generation in 2030 to 20%, from the 10% targeted by the RPS in 2024. This is an improvement but still far below the expected renewable development to be considered as “2˚C-compatible”.
The plan also takes into account a projected peak electricity demand in 2030 at 100.5 GW, which is 11% lower than the last edition of the plan, as the economy is expected to grow at a slower pace than two years ago. The current power capacity surplus (generated by recently built coal-fired power plants) provides headroom for a rapid build-out of renewable energy generation (E3G, 2018) that also represents an opportunity for Korean companies to expand into the renewables market. The plan also revised the estimated electricity demand for 2030 from 657 TWh (as defined in 2015) to 579.5 TWh (Ministry of Trade, Industry and Energy, 2017b).
In May 2017, responding to growing concerns over air quality, the government had announced that it would bring forward the shut-down of ten old coal-fired power plants—originally scheduled for 2025—to 2022 (Reuters, 2016) and also reconsider the nine coal-fired power plants which were seeking permits or under construction at that time. The Moon administration has only secured an agreement to convert two of the new plants to gas (E3G, 2018) and, as the new projections from the 8th Plan show a slight increase of coal-fired capacity by 2030 (from 36.8 GW to 39.9 GW), it suggests that the remaining plants will be built.
The new Plan also indicates that the government intends to expand its total gas-fired capacity from 37.4 GW to 47.5 GW by 2030 (a significantly lower level than previously announced, probably partially due to the expected lower electricity demand level) while confirming the shift away from its current nuclear-centred energy policy. It intends to reduce the share of nuclear electricity generation from 30% in 2015 to 24% in 2030, and phase out nuclear power in the long term.
In summary, the government 8th Plan would result in an electricity generation mix in 2030 based on 23.9% nuclear, 36.1% coal, 18.8% natural gas and 20% renewable energy (Ministry of Trade, Industry and Energy, 2017a). The significant difference with previous targets comes from the drop in natural gas-based generation (27% in previous announcement from May 2017) that is mostly compensated by the share of coal-based generation remaining very high (+14% compared to previous announcement from May 2017). Even though the renewable energy target is an encouraging signal, the government has to do more to shift its power sector away from fossil fuels.
The impact of the new “Plan for Electricity Supply and Demand” is not quantified in CAT’s analysis of South Korea’s current policy projections, due to the lack of laws or measures to implement them. The CAT estimates that if fully implemented (and taking into account the expected lower level of electricity demand highlighted above), these announcements would lead to a 69 MtCO2e/year (24%) reduction in electricity-related emissions under current policies in 2030 (refer to “Planned policy projection” on the graph above). This is equivalent to a 9% reduction in total GHG emissions excl. LULUCF in 2030, compared to the projection under current policies.
In 2015, the transport sector represented 17% of national CO2 emissions from fuel combustion.
In 2014, South Korea strengthened its light-duty vehicle emissions standard to 97 gCO2/km by 2020 (TransportPolicy, 2015).
The number of annual electric vehicles (EVs) sales doubled from 2015 to 2016 to nearly 6,000. Still a very low number compared to the more than 850,000 cars registered in 2015 (Korea Times, 2016). The South Korean Government is pushing the uptake of EVs, with a goal of having 250,000 EVs on the road by 2020 (or 1.5% of the projected fleet) (IEA, 2017a), through subsidies of up to US$12,000 per vehicle; local authorities also offer an additional subsidy of up to US$10,000 per vehicle (Financial Times, 2017). The government is also investing in a programme to improve charging infrastructure.
Based on the recently adopted revised 2030 GHG roadmap, South Korea intends to expand the supply of eco-friendly vehicles (including the supply of 3 million electric vehicles in 2030) (Ministry of Environment, 2018).
The government also announced a five-year plan to support the uptake of hydrogen-powered vehicles with the goal to supply 16,000 vehicles and build 310 hydrogen refilling stations across the country over the period. The plan includes the introduction of state support to businesses for the development of fuel cell stacks and fuel cell storage containers, as well as tax breaks for hydrogen vehicle drivers (The Korea Herald, 2018).