Yes, the Republic of Korea (“Korea”) is a signatory of the Paris Agreement and has ratified it on 3 November 2016.

Korea submitted its INDC to the United Nations Framework Conventions on Climate Change (“UNFCCC”) in June 2015, committing to reduce its greenhouse gas emissions by 37% from the business-as-usual (“BAU”) level by 2030 across all economic sectors.

The Framework Act on Low Carbon, Green Growth (“Green Growth Act”), enacted in 2011, provides a legal basis for many key national policy instruments regarding climate change in Korea.  Following the enactment of the Green Growth Act, the Korean government announced the National Greenhouse Gas Emissions Reduction Roadmap in 2014 (and revised the same in June 2018).  Furthermore, per Green Growth Act, the Green Growth Plan and the National Climate Change Adaptation Plan are established and implemented every five years as national mid-/long-term plans in response to climate change.  In December 2016, the Korean government announced the First Basic Plan for Climate Change Response (for the years 2017-2036), the Second Basic Plan (for the years 2020-2040) in October 2019.  These national policy instruments are domestic implementations of the INDC submitted to the UNFCCC and contain specific measures to achieve the national reduction targets proposed in that INDC. 

To implement the aforementioned plans, the Korean government has introduced: (i) the Greenhouse Gas and Energy Target Management System (“TMS”) under the Green Growth Act in 2012, (ii) a greenhouse gas (“GHG”) emissions allocation system and a national cap-and-trade system commonly known as the Korean Emissions Trading System (“K-ETS”) under the Act on the Allocation and Trading of Greenhouse-Gas Emission Permits (“Emissions Trading Act”) in 2015, and (iii) the Renewable Portfolio Standard (“RPS”) scheme under the Act on the Promotion of the Development, Use and Diffusion of New and Renewable Energy (“Renewable Energy Act”) in 2012.

Following the announcement of the Third Master Plan for the Emission Trading Scheme in December 2019, the Korean government announced the Phase 3 National Allowance Allocation Plan in September 2020. These plans will reduce the amount of free allocation of emissions allowances while introducing third-party market makers to stabilize the emissions trading market and are expected to further strengthen K-ETS and solidify the Korean government's efforts to reduce greenhouse gas emissions.

Yes. The Moon administration has vowed to move away from nuclear energy and such a nuclear phase-out policy is one of the highlights of the Third Energy Basic Plan (for the years 2019-2040) announced in June 2019.

Moreover, the Third Energy Basic Plan seeks to significantly reduce the national dependence on coal and oil by increasing the proportion of renewable energy from 7.6% in 2017 to 30-35% by 2040. In particular, the Korean government currently implements a temporary management system of particulate matters from December to March of the following year and suspends or restricts of operation of coal-fired power plants during that period.

The adopted climate change legislation in Korea are (1) the Green Growth Act; (2) Emissions Trading Act; and (3) the Renewable Energy Act.

Yes, Korea participates in a national GHG emissions trading scheme, commonly known as the K-ETS.  Under the K-ETS, emissions rights are allocated to around 600 companies and public entities whose total annual emissions are not less than 125,000 tCO2, or to companies with places of business with annual emissions not less than 25,000 tCO2.  If a company or a public entity’s emissions exceed the allocated emissions, then it must either offset excessive emissions by purchasing emissions rights from the emissions trading market or pay administrative fines. 

On the other hand, Korea does not participate in an international GHG emissions trading scheme. Although there have been discussions about linking the K-ETS with other markets, such linkage has not been made available yet.

No, there is no CO2 tax per se in Korea.  However, the Korean government is actively contemplating the introduction of CO2 tax and has subcontracted related research projects, while a CO2 tax bill has been proposed in the National Assembly.

Yes, in 2010, the Green Growth Korea and relevant authorities announced the Korean National CCS Master Action Plan, which provided a roadmap until 2020 and eventually led to the establishment of the Korea Carbon Capture & Sequestration R&D Center (“KCRC”). KCRC will invest 172 billion KRW to support technological developments that are expected to contribute to reductions of GHG. 
 
That said, as of now, CCS technology is not commercially available in Korea. If CCS technology becomes commercialized, the project could be approved as a Clean Development Mechanism (“CDM”) project for its GHG reductions.  Such a project would be subject to the issuance of Certified Emission Rights (“CER”) credits, or the companies could directly utilize the project to reduce GHG emissions.

Yes. The production and/or use of renewable energy sources is supported by the RPS.  Since 2012, the Korean government has implemented the RPS, converting from the previous feed-in-tariffs regime. Additionally, the Korean government has obliged companies with a generation capacity of 500MW or more to generate a certain minimum percentage of gross power from renewable energy sources.  Currently, 23 large power companies in Korea are subject to this obligation.  Failure to meet the required generation quota may result in administrative fines of an amount equivalent to 1.5 times the average trading price of a renewable energy certificate (“REC”).

Under the Renewable Energy Act, a REC is a “certificate authenticating the fact of supply by using new or renewable energy facilities,” based on each MWh (megawatt-hour) of electricity generated from a renewable energy resource. The New and Renewable Energy Centre of Korea issues RECs, which can be traded once they are issued. Typically, 21 large power generation companies fulfill their RPS obligations by purchasing RECs from renewable energy power producers.

The Korea Electric Power Corporation (“KEPCO”) verifies and monitors the amount of renewable energy generated.  The produced electricity from renewable energy is integrated into KEPCO’s electricity grid network as electricity can only be sold through the Korea Power Exchange (“KPX”) in Korea.  In this regard, renewable energy producers in Korea earn revenue by selling electricity to KEPCO through KPX and by trading RECs with the 23 large power generation companies.

As of December 2019, renewable energy companies typically generated revenue of approximately 77,000 KRW per MWh, and 34,000 KRW per one unit of REC. However, the Korean government is currently contemplating legislation of laws that will significantly increase the demand and thereby raise the price of RECs. It is also currently considering the enactment of a law that will regulate hydrogen-related matters and thereby separate fuel cells from the existing RPS scheme by creating a new Hydrogen Portfolio Standard (HPS) scheme.

Moreover, in Korea, the production and/or use of renewable energy sources is subject to subsidies. The Korean government promotes the use of renewables by investing in energy-saving facilities and equipment. It also provides financial support (either free-of-charge or at low-interest rates) to entities related to or invested in the reduction of GHG emissions.  For example, to facilitate the installation of renewables equipment or facilities, government funding is available to entities that rent solar power facilities to homes and other facilities. In addition, low-interest financing is available to entities that install or operate renewable energy facilities.

The Korean government seeks to improve the energy efficiency of the building environment by establishing a comprehensive standard applicable from the blueprints to the post-construction operation of the buildings.  In particular, the government subsidizes up to 50% of the installation costs of renewables equipment (such as solar power) in houses, buildings, local government buildings, and social welfare facilities.  Once installation of renewables equipment is complete, financial support is available to businesses that rent out renewables equipment.  Financial support is also available for the manufacturers of renewables equipment.

The Korean government strives to expand environment-friendly infrastructure (e.g., public transportation) and offers various incentives such as tax reductions for electric and hybrid vehicles.  In 2020, the government has allocated 1.5 trillion KRW of its budget to promote the use of electric vehicles and fuel cell electric vehicles, as well as the establishment of additional hydrogen stations.

In addition, under the Renewable Energy Act, Korea has implemented the Renewable Fuel Standard (“RFS”), which is a government policy to blend new and renewable energy fuels with transport fuels (article 23-2) to improve the fuel efficiency of the automobiles and to reduce emissions produced therefrom.  In the case of transport fuels, biodiesel is mixed with diesel oil for automobiles up to the applicable mandatory blending ratios.  Petroleum refinery businesses and petroleum export-import businesses are subject to RFS.

As previously explained, TMS, K-ETS, and RPS are the key national measures established and implemented to reduce GHG emissions and improve energy efficiency.  For instance, K-ETS is one of the most important climate change policy measures in Korea as it allocates emission rights (and, of course, obligations following such allocation) mainly to large emitting companies, which covers more than 70% of Korea’s emissions.  Likewise, RPS, focusing on large power generation companies, is also considered an effective measure to expand the country’s usage of renewable energy in the industry sector.

The Korean government also supports the Energy Saving Company (“ESCO”) and provides loans at lower interest rates than the market pursuant to the Renewable Energy Act and regulations thereunder.

Businesses in the agriculture and land-use sector may be subject to TMS or K-ETS if it is a large emitter under the Green Growth Act or the Emissions Trading Act.  If so, such businesses are obligated to reduce GHG emissions in accordance with the regulations.  For reference, the reduction rate for the agriculture and land-use sector is 8.2% from the BAU.

The Korean government also implements policies to reduce agricultural methane produced by small agricultural emitters who are not subject to TMS or K-ETS.  For example, the government offers low-carbon agricultural technology to the agricultural sector, and issues certifications to low-carbon agricultural products.

Electricity production is part of the transition sector and is one of the major sectors subject to the TMS, K-ETS, and RPS.  Moreover, K-ETS covers all emissions including emissions related to electricity consumption.  The inclusion of indirect emissions, such as electricity consumption, creates an incentive for large emitters to enhance energy efficiency and reduce electricity consumption.

Under the Renewable Energy Act, to streamline energy use and promote GHG reductions, the Korean government has implemented a low-interest financing support system for businesses that invest in energy-saving facilities and reduce GHG emissions.  The Korean government also provides funding to small-scale renewable energy facilities at no cost and low-interest loans.  No such funding is available to fund large-scale renewable energy facilities at this time.  Please see the question "What are the main national measures being taken to reduce GHG emissions /improve efficiency in the built environment?".

Financial institutions in Korea, such as bankers' associations, commercial banks, and insurance companies, brokerage firms, and fund management companies, have created Green Finance Council to develop and operate products and provide loans for new and renewable energy.  These initiatives support ESCO projects, guarantees, funds, and insurance.  These green financial products are just one of the types of financial support provided in addition to those described above.

Yes. Most of the litigation cases relating to climate change have been public law-based administrative litigation between companies and relevant authorities such as the Ministry of Environment, Ministry of Trade, Industry and Energy, etc. regarding the amount of the allocated emissions rights. In most cases, such claims are dismissed as Korean courts have recognized a broad discretion of the Korean government regarding the allocation of emissions rights. In addition to such administrative litigations, there are some civil law-based claims between companies concerning indirect emissions or other breaches of contract issues.

Under the Emissions Trading Act, CDM projects implemented by domestic corporations in foreign countries may be certified as external projects by the Korean government subject to specific requirements. Once a CDM project is certified, the CERs from the project can be converted into KOCs (Korean Offset Credits), which can then be traded within K-ETS or converted to KCUs (Korean Credit Units) to offset the GHG emissions. Korean companies actively engage CDM projects, but it remains to be seen whether this trend will continue with the introduction of the Sustainable Development Mechanism under the Paris Agreement.

In 2020, the Korean government announced the green “new deal,” which provided the nation's coronavirus recovery package with a digital-green focus and an emphasis on investment promoting the “green economy.” The Korean government's such plans were re-emphasized with President Moon’s speech to the National Assembly in December 2020 announcing a net-zero target and a commitment to become “carbon neutral by 2050.”