Introduction
The Copenhagen Accord called on Annex I countries to make their climate change pledges, and on Annex II countries to identify their nationally appropriate mitigation actions by 31 January 2010.
In this edition of the Asia Pacific climate change policy series we examine the Copenhagen Accord commitments made by the Republic of Korea, a non-Annex I country to the Copenhagen Accord. We also examine the regulatory framework that the Republic of Korea is implementing to meet its Copenhagen Accord commitments, and the climate change investment opportunities that this will generate.
Key points on the Republic of Korea:
- seeks to reduce national greenhouse gas emissions by 30 per cent by 2020
- "green growth" is a core part of its economic development strategy
- the establishment of a new cap and trade emissions scheme will generate a number of carbon related investment opportunities
- the government announced in July 2010 its plans to invest the equivalent of US$1.9 billion by 2019 to build up carbon capture technology and industrial infrastructure, so as to reduce the country's greenhouse emission levels
- is engaging in dialogue with Japan and China on a new emissions trading scheme, and it is a possibility that the three countries may decide to link their emissions trading schemes at some point.
Copenhagen Accord commitments
The Republic of Korea's target under the Copenhagen Accord is to implement a 'national mitigation strategy' to reduce national greenhouse gas emissions by 30 per cent by 2020 on a "business as usual" basis. This will equate to a reduction of greenhouse gas emissions by four per cent below 2005 levels.
The Republic of Korea's target of 30 per cent emissions reduction by 2020 represents the highest target recommended by the Inter-governmental Panel on Climate Change for developing countries. The Republic of Korea has purportedly chosen this target to promote "green growth" as a core part of its economic development strategy.
Regulatory framework
New legislation
The "Framework Act on Low Carbon and Green Growth" was implemented in April 2010. The Act requires mandatory reporting of carbon emissions and provides a framework for the regulatory process that will be needed to achieve the Copenhagen Accord commitment of a 30 per cent reduction. The Framework Act takes precedence over other laws in relation to low carbon and green growth.
Most notably, the Framework Act provides a basis for the creation of an emissions trading scheme for CO2 and other industrial gases. It is likely that the Framework Act will be supplemented by detailed emissions trading legislation setting out the operational structure, the method of allocation of emission permits, the sectoral coverage and other implementation details. The Republic of Korea is also considering the possibility of trading certified emission reductions created under a domestic version of a UN scheme that promotes and rewards investors of clean energy projects1.
The Republic of Korea is engaging in dialogue with Japan and China on a new emissions trading scheme, and it is a possibility that the three countries may decide to link their emissions trading schemes at some point.
The Republic of Korea, Japan and China have together adopted a five-year plan that pledges cooperation on the environment, focusing on 10 areas including climate change and biodiversity conservation2.
The Framework Act also requires the establishment and enforcement of a national strategy for low carbon and green growth; the establishment and implementation of basic plans for climate change and energy every five years (which will include measures for the supply and use of environmentally friendly and renewable energy); and mandatory emissions reductions for big emitters.
In July 2010 the government also announced its plans to invest the equivelent of US$1.9 billion by 2019 to build up carbon capture technology and industrial infrastructure, so as to reduce the country's greenhouse emission levels. The joint plan by the science and technology, knowledge economy, and environment ministries aims to capture and store large amounts of CO2 released from steel mills and thermal power plants so they do not reach the atmosphere and contribute to global warming.
Existing regulation
Between 1990 and 2005, the Republic of Korea saw a doubling of CO2 emissions, the highest increase amongst the OECD countries.
Prior to committing to its reduction target under the Copenhagen Accord, the Republic of Korea had already taken a number of steps towards addressing climate change issues and reducing its CO2 emissions3.
In early 2009, the Republic of Korea established the Presidential Committee of Green Growth and launched the "Green New Deal" economic stimulus package of which about 80 per cent was allocated to environmental and climate change measures. By July 2009, a Five Year National Plan for Green Growth (Five Year Plan) had been finalised by the Government4. The Five Year Plan provided a medium term plan for the implementation of the National Strategy for Green Growth over the period from 2009-2013.
One of the priorities of the Five Year Plan is to increase the share of new and renewable energy from 2.7 per cent in 2009 to 6.08 per cent in 2020. For more information on renewable energy in the Republic of Korea, please refer to our Asia Pacific renewable energy manual.
Investment opportunities
The establishment of a new cap and trade emissions scheme in the Republic of Korea will generate a number of carbon related investment opportunities.
There will also be significant investment opportunities associated with the possible linking of the emissions trading schemes in the Republic of Korea, Japan and China.
It is likely that there will be a number of technology driven and energy efficiency investment opportunities associated with the new Framework Act on Low Carbon and Green Growth, which establishes the national strategy for low carbon and green growth.
The Republic of Korea is currently dependent on oil and gas imports for 97 per cent of its energy use. We expect that investment opportunities will arise through the implementation of renewable energy projects, including solar, wind and hydropower projects. As forests cover more than two-thirds of the Korean land surface, there will be potential to reduce emissions from and invest in forest carbon projects.
There are also likely to be investment opportunities associated with research and development in green technologies, the expansion in domestic production of renewable energy technologies and the greening of key industries in the Republic of Korean economy.
Some of the particular technologies which have been earmarked for development in the Five Year Plan include solar cells, bio-energy, light water reactors and fuel cells.
Experience
Norton Rose Group has one of the leading and best resourced legal practices across Asia Pacific. We have acted and advised on a number of carbon investment projects in the Republic of Korea, Japan and China jurisdictions. We recently advised a leading gas company compliance buyer on its purchase of CERs generated from catalytic N20 abatement at a nitric acid plant in the Republic of Korea.
With our in-depth understanding of the carbon markets and legislative regimes in these countries, we are well placed to assist our clients maximise the investment opportunities associated with the inter-linkages throughout the jurisdictions.
1 http://in.reuters.com/article/idINSGE6420BH20100504
2
http://www.bloomberg.com/news/2010-05-23/japan-south-korea-to-exchange-information-on-emissions-trading-mechanism.html
3 United Nations Environment Programme "Overview
of the Republic of Korea's National Strategy for Green
Growth", April 2010, page 18.
4 As above
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.