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To combat fine dust, gov’t makes LNG cheaper to import

Mar 20,2019
To tackle pollution, the government will lower tariffs on imported liquefied natural gas (LNG) and offer new benefits for Koreans to invest in Saemangeum, its renewable energy megaproject.

According to the Ministry of Land, Infrastructure and Transport, tariffs on LNG used for power plants will be reduced by 84 percent from 24.2 won per kilogram (0.952 cents per pound) to 3.8 won starting April 1.

When considering a recent cut in individual consumption tax on LNG from 60 won per kilogram to 12 won, overall taxes imposed on LNG for power plant use will fall significantly to 23 won per kilogram from 91.4 won per kilogram.

The goal is to encourage the use of LNG power plants in lieu of coal-fueled thermal power plants. The government has been promoting LNG as a cleaner energy source.

LNG, a fossil fuel, is not completely environmentally friendly, but it is cleaner than coal. Emissions of nitrogen oxide from LNG are one-tenth the level from coal.

The government projected that its tax changes for LNG will reduce ultrafine dust by 427 tons a year.

The Moon Jae-in administration has been trying to scale back Korea’s dependence on nuclear power plants because of fears of nuclear disasters like that of Japan in 2011. The government plans to reduce the contribution of nuclear power from the current 30 percent to 18 percent by 2030.

But now air pollution is the public’s biggest worry, and scaling back nuclear power has been blamed for a heavier reliance on fossil-fueled power plants that pollute.

According to Liberty Korea Party lawmaker Jung You-sub on Tuesday, the power generated from fossil-fuel-based power plants has been steadily increasing in the last three years.

Power generated from fossil-fueled power plants last year grew to 401,801 gigawatt hours, 7.5 percent higher than in 2017. When compared to 2016 - before the Moon government took office in May 2017 - the figure was up 14.1 percent. The energy contribution from such power plants has gone up 5.2 percentage points in the last two years to 70.4 percent.

Since air pollution has deepened across Korea - ultrafine dust emergency alerts were issued for five consecutive days since the beginning of this month - Moon has ordered his government to come up with ways to deal with it. LNG has become the center of Moon’s solution.

According to the government, one of the reasons coal plants are predominant is the cost of LNG, especially the taxes. On top of the 24.2 won per kilogram tariff on imports, a 60 won individual consumption tax and a 7.2 won customs tax was levied, bringing the total to 91.4 won per kilogram.

In contrast, coal only has a 36 won per kilogram individual consumption tax levied on it.

The taxes contributed to raising the production unit cost of LNG. The production unit cost at a coal-powered thermal power plant was 84.9 won per kilowatt hour. At an LNG powered plant, the unit cost was 118.07 won per kilowatt hour.

As of 2017, coal powered plants accounted for 45 percent of Korea’s energy while LNG plants accounted for 16.9 percent.

To discourage the use of coal, the government raised the individual consumption tax on coal to 46 won per kilogram.

The announcement cutting LNG tariffs came the same day the cabinet passed a bill lifting restrictions on purchasing LNG-fueled vehicles.

As of last year, there are 2.03 million LNG-fueled vehicles accounting for 8.8 percent of all registered vehicles.

Previously, LNG vehicles were permitted only for commercial uses like taxis and for drivers with disabilities.

The Ministry on Land, Infrastructure and Transport said Tuesday that the government will be cutting the price of leases on reclaimed land in the Saemangeum project to one-fifth the current level for all companies. Those cheap leases were previously only offered to foreign companies investing in Saemangeum.

The government wants more private Korean investors to come to Saemangeum.

It also hopes to break ground on the Saemangeum project before its earlier timetable of 2021.

Last September, Moon’s government said Saemangeum would become the nation’s hub for renewable energy. It plans a solar farm that will generate 3 gigawatts a year and an offshore wind farm that will generate 1 gigawatt. According to the government, generation of 4 gigawatts of power is equivalent to four nuclear power plants.

Companies setting up in the Saemangeum industrial complex will now only have to pay 1 percent of the land value. For example, if a company establishes a company on 20,000 square meters (4.9 acres) of land, it would have had to pay 6.7 billion won for 50 years’ rent. Under the new regulation, that company would pay only 1 million won a year.

The Ministry of Environment and the Ministry of Oceans and Fisheries announced a joint effort Tuesday of halving emissions of fine dust by 2022. This includes encouraging companies to change to more environmentally friendly LNG vessels and installing gas emission systems on outdated diesel-fueled cargo trucks.

“Through the joint efforts with the Ministry of Oceans and Fisheries, we expect a significant improvement in the fine dust problem in port areas that were considered blind spots,” said Environment Minister Cho Myung-rae.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]


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