Gov't, banks to spend $338B by 2030 on slashing carbon emissions

Finance

Published: 19 Mar. 2024, 11:13 Updated: 19 Mar. 2024, 16:43

Gov't, banks to spend $338B by 2030 on slashing carbon emissions

Financial Services Commission Chairman Kim Joo-hyun, right, speaks during a press conference held on Tuesday in western Seoul. To his left is Environment Minister Han Wha-jin. [NEWS1]

The Korean government and financial institutions will channel a combined 452 trillion won ($337.8 billion) into climate initiatives through 2030 as the country aims to cut its carbon emissions by 40 percent compared to 2018 levels by the end of the decade.

The announcement was made Tuesday by the Financial Services Commission (FSC) during a press conference held in Mapo District, western Seoul.

FSC Chairman Kim Joo-hyun, Presidential Commission on Carbon Neutrality and Green Growth co-Chair Kim Sang-hyup, Environment Minister Han Wha-jin and the chiefs of five commercial banks attended the event.

“It is a first step toward addressing the climate crisis through joint efforts by the government, state financial institutions and banks,” the FSC head said in his remarks during the conference.

The latest move led by the financial authorities aligns with the global trend of tightening environmental regulations, such as the European Union’s Carbon Border Adjustment Mechanism.

“The unprecedented level of climate change that we face today is an issue that we need to tackle not only to enhance the competitiveness of Korean companies, but also for the sake of future generations,” he stressed.

Government-funded institutions including the Korea Development Bank, the Export-Import Bank of Korea, the Industrial Bank of Korea, the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation will provide 420 trillion won in policy financing to accelerate a low-carbon transition for local companies by 2030.

The sum translates to an average of 60 trillion won of funding per year dedicated to sustainability initiatives, a 67 percent increase from the annual average over the last five years.

The government estimates that the funding will help cut carbon emissions by 86 million tons, equivalent to 29.5 percent of the total carbon reduction the government pledged to achieve by the target year.

Moreover, five commercial banks — KB Kookmin, Shinhan, Hana, Woori and NongHyup — will establish a 9 trillion won fund dedicated to the energy transition along with the Korea Development Bank. Government institutions will also provide subordinated loans worth 14 trillion won in total.

The primary aim is to expand the renewable energy capacity, including solar and wind power. Korea aims to bring renewable energy’s share of the country’s total energy mix from 7.5 percent in 2021 to 21.6 percent by 2030 and 30.6 percent by 2036.

An additional 9 trillion won will be jointly invested by the government and the private sector into climate technologies, such as hydrogen, carbon capture and renewables. Korea’s climate technology is currently about three years behind other advanced economies, according to the FSC.

The government will also revamp its policy and regulations to further facilitate private investments in climate response efforts. The plan is to set up a guideline for the implementation of the Korean version of a "green taxonomy" — a list of economic activities considered environmentally sustainable — in the financial sector this year, and also help companies mitigate climate risks.

Korea pledged in 2020 to achieve carbon neutrality by 2050.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]