Seoul: South Korea's new carbon reduction target unveiled this week is expected to pose challenges for local businesses amid lingering global economic uncertainties, while at the same time offering an opportunity for a full-fledged green transition that will pay off in the long run, experts said Tuesday. On Monday, the Presidential Commission on Carbon Neutrality and Green Growth said it approved a goal to reduce South Korea's greenhouse gas emissions by 53-61 percent from 2018 levels by 2035.
According to Yonhap News Agency, the nationally determined contribution (NDC) target, endorsed at a Cabinet meeting on Tuesday, will be officially unveiled at the 30th United Nations Climate Change Conference (COP30) in Belem, Brazil, which began Monday and will run through Nov. 21. The business community fears the carbon reduction plan may deal a harsh blow to key industries, including automobiles, steel, petrochemicals, and cement, as they will face higher financial burdens in building carbon reduction facilities and purchasing emission credits.
"While adjusting to changes in the global economic environment, including U.S. tariff policies, has become an urgent issue, setting the reduction target at 53 to 61 percent by 2035 will pose a significant burden for companies," a group of 14 business lobbies said in a joint statement. The business organizations noted that relevant reduction technologies have not yet been fully commercialized, urging the government to introduce additional support measures for companies, such as refraining from raising electricity rates.
Experts echoed the view, noting that under the current state of the industries, implementation of the new emission policy could push companies to relocate their production lines overseas or even shut down operations. Yoo Seung-hoon, a professor of energy policy at Seoul National University of Science and Technology, said the NDC target will inevitably lead to a major setback for industries, stressing that business officials would have felt a sense of "panic" following the announcement.
"Local businesses will have no choice but to reduce domestic production or relocate their manufacturing lines overseas," Yoo told Yonhap News Agency when asked about the impact of the NDC target on South Korean industries. "For example, the steel industry needs to utilize hydrogen during the production process to meet the target, but it will cost more, and securing the gas remains a challenge," the energy professor said.
"Companies like POSCO would have no choice but to relocate their facilities to other countries, such as the United States or Southeast Asia," Yoo said. "The same applies to the cement sector, and South Korea may have to rely on Chinese products if domestic cement producers decide to shut down." Yoo also expressed concerns over the petroleum segment, as the government's target calls for significantly expanding the share of eco-friendly cars, which will inevitably lead to a decrease in the production of conventional vehicles.
"Without conventional cars, the production of gasoline will fall, and the decline will affect other products, including aviation fuel," Yoo warned. South Korean carmakers, including Hyundai Motor Group, will be forced to scale down production of conventional cars, which would shut down thousands of auto parts suppliers, he added.
The semiconductor industry, meanwhile, is expected to be indirectly affected due to an anticipated hike in electricity prices. "We need to significantly increase the supply of renewable energy to meet the target, which will push up electricity bills and ultimately undermine the sector's competitiveness," Yoo said.
Accordingly, experts urged the government to provide details on how the country will maintain normal operations of industries, especially amid growing energy demand from the artificial intelligence (AI) sector. Choi Sung-min, a nuclear energy professor at the Korea Advanced Institute of Science and Technology (KAIST), told Yonhap News Agency the government needs to open options to expand the energy portfolio and revitalize the nuclear energy industry to meet the reduction target.
"We need to maintain a stable supply of electricity to ensure energy security, and achieving the target will be impossible if we rely solely on renewable energy sources," Choi said.