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Korea Regulatory Structure PDF
Korea Regulatory Structure PDF
Tokyo, Japan
• Need for transitioning to low-carbon energy structure required under global climate change
regulation.
– South Korea heavily depends on fossil fuels such as petroleum and coal.
South Korea globally ranks 10th in energy consumption, 9th in petroleum consumption, and 5th in petroleum import.
Use of fossil fuel results in pollution and global warming.
– 1997 Kyoto Protocol and 2015 Paris Agreement on Climate Change
• Public antipathy against air pollution from coal power plants is on the rise.
– Fine dust became a top-priority issue among the public.
4
2. South Korea’s Energy Supply Structure
Million toe
Renewable
Nuclear
Hydro
LNG
Petroleum
Coal
1990 2015
Import
Domestic Production
Reliance on Import (%)
• While the supply of renewable energy is on the rise, it does not meet the level of developed countries.
Primary energy
Renewable energy
Supply proportion (%)
8,251
5,074
1,954
1,659
1,223
775 587 Worldwide 16th
in Cumulative CO2e
(1900~2011)
China U.S. India Russia Japan Germany Korea
9
3. South Korea’s Position in GHG Emissions (continued)
[South Korea Major GHG Emitters (2014)] (Source: GHG Inventory and Research Center)
Rank Company Sector Emissions (CO2e)
1 POSCO Steel 75,788,901
• Power sector emissions account for approx. 35% of total GHG emissions, among which 77% is from coal power
generation.
10
II. South Korea’s Challenges
Under the New Climate Change Framework
1. South Korea’s Position Under the Kyoto Protocol Framework
12
1. South Korea’s Position Under the Kyoto Protocol Framework
(continued)
• The details of the duty to reduce GHG emissions under the Kyoto Protocol
– The Kyoto Protocol provides a list of GHGs to be reduced (Annex A), countries that bear the duty and their
specific reduction amounts (Annex B).
– Annex I countries
Only Annex I countries bear the duty to reduce.
Specifically, during the first commitment period, they shall reduce, on average, 5.2% as compared to the percentage in
1990.
– Non Annex I countries
Non Annex I countries (developing countries) do not bear such a duty, and only bear the general duties provided by the
UNFCCC.
South Korea was designated as a developing country, and therefore had no official duty to reduce GHG emissions.
13
1. South Korea’s Position Under the Kyoto Protocol Framework
(continued)
Clean Development Mechanism Article 12 If an Annex I country (Country A) invests in a Non Annex I
(CDM) country (Country C) and Country C reduces GHG emissions, a
portion of the reduced amount is recognized as a GHG emissions
reduction by Country A.
Emission Trading Article 17 The Kyoto Protocol imposes GHG emissions limits on the countries
(ET) that bear the duty to reduce (Annex I countries), and allows such
countries to trade the emission permits amongst each other.
14
2. Self-initiated Establishment of a 30% Reduction Target Against the
2020 BAU Emissions
• Under the Kyoto Protocol Framework, with COP 15, the Korean Government, on its own initiative,
established a target of “30% reduction against the 2020 BAU (Business As Usual) emissions” in Nov. 2009.
Unit: Mt CO2e
776
30% reduction
(- 233 Mt CO2e)
594
543
298
15
3. The Adoption of Diverse Policies for GHG Emissions Reduction
• In order to accomplish the 2020 reduction target, South Korea is actively enforcing diverse policies
for GHG emissions reduction, which includes the following:
– Emission Trading Scheme (“ETS”) under the Emission Trade Act (2015~)
(i) Among the countries with no duty to reduce under Kyoto Protocol Framework, South Korea was the first
country to operate a national level emission trade market, starting in 2015.
(ii) Business entities with an annual average GHG emissions of 125,000 tons or more, or business entities that
have a place of business with an annual average GHG emissions of 25,000 tons or more have participated (in
2014, emission permits have been allocated amongst 23 sectors, 525 business entities).
– The Target Management System for GHG and Energy (“TMS”) under the Framework Act on Low Carbon,
Green Growth (2010~)
Among the business entities with high level of GHG production or high level of energy consumption, the
system imposes reduction targets for energy consumption and GHG production on the business entities that
were not the subject of Korean ETS (in Nov. 2015, about 315 small and medium-sized businesses were the
subject of the TMS).
The system has been introduced to establish MRV (Monitoring, Reporting, and Verification) prior to the
introduction of Korean ETS.
16
4. The PACC Background
• The need for the Paris Agreement on Climate Change (the “PACC”) arose from the incomplete
success of the Kyoto Protocol.
• The Half Success of the Kyoto Protocol
– During the first commitment period (2008~2012), the Annex B countries reduced the GHG emissions by 22.6%
compared to the levels in 1990s (far exceeding the target reduction rate of 5.2%).
– 128 countries have carried out 8,000 CDM projects during the first commitment period, and successfully reduced
more than 1.5 Bt CO2e.
17
4. The Regulatory Structure of the PACC
18
4. The Regulatory Structure of the PACC (continued)
19
4. The PACC Structure
Purpose (Art 2)
Mitigation – Adaptation – Financial flows
All Parties to take and communicate efforts towards L&D Sinks Mechanisms
purpose + “progression over time” (Art 3) (Art 8) (Art 5) (Art 6)
Stocktake every 5 years of collective progress towards purpose and long-term goals (Art 14)
Source: Ecological Institute, the Paris Agreement: Analysis, Assessment and outlook (2016)
20
4. The PACC Structure (continued)
• Comparison with the Kyoto Protocol
Responsible
Mostly developed countries All party countries
Countries
Punitive
Punishment for
(additional imposition for the next commitment Failures to Meet Non-punitive
period of the reduction amounts, i.e. 1.3 times Targets
the deficiency from the target amount)
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5. South Korea’s obligations under the PACC
• The PACC has equal force and authority as domestic laws do in South Korea
– Once the President ratifies the PACC after the Congressional approval, the PACC will have equal force as domestic
laws do in South Korea (Articles 6, 60, and 73 of the Constitution). Domestic process was finished on Nov. 3 2016
and the PACC took effect from Nov. 4 2016.
• Whether South Korea, as a developed country, bears the duty to sponsor developing
countries(e.g., duty to financially sponsor developing countries)
– While the PACC distinguishes between developed country parties and developing country parties when it comes to
imposition of obligations and performance for mitigation, adaption, finance, etc., the PACC does not explicitly
define “developing/developed countries”, so it is uncertain as to which category South Korea falls into. There are
strong arguments that, based on many indicators such as GHG emissions and the size of its economy, South Korea
possesses the abilities of a developed country, and, therefore, should bear the corresponding duties of a developed
country. In light of these arguments, there can be significant international pressure on South Korea to actively
sponsor developing countries.
22
6. Countermeasures to Achieve Reduction Target Under the New
Climate Change Framework
Unit: Mt CO2e [South Korea’s Announcement of its NDC] 851
783
688
- 30% - 37% vs. BAU emissions
594 543 -1.3% 536
298
1990 2005 2012 2020 BAU 2020 Target 2030 BAU 2030 Target
• In light of the new climate change framework, South Korea announced in June 2015 that it would
reduce GHG emissions by 37% against 2030 BAU emissions.
– (i) Domestic Reductions (Reduction Within South Korea): 219 Mt CO2e (25.7% of the 37%, only the reduction
activities carried out in South Korea are available) ⇒ Expected 2030 domestic GHG emissions: 632 Mt CO2e [89 Mt
increase from expected 2020 domestic GHG emissions target (543 Mt)]
– (ii) International Offsets (Reduction Outside of South Korea): 96 Mt CO2e (11.3% of the 37%, the purchase of
international emission permits and the reduction activities carried out abroad are available)
23
6. Countermeasures to Achieve Reduction Target Under the New
Climate Change Framework (continued)
• In order to accomplish the 2030 reduction target, South Korea needs to adopt and enforce strong
and effective policies, including:
• 2) The need for introduction of a new policy for GHG emissions reduction
– There are strong arguments for the need for additional policies in order to accomplish the 2030 reduction target,
because the current policies that focus mainly on the K-ETS cannot adequately secure potential increase in future
reduction capacity.
– In this context, South Korea will aggressively push ahead with renewable energy policy that contributes to reducing
GHG emissions.
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III. South Korea’s Renewable Energy Promotion
Policy
1. History of Proportioning Renewable Energy in South Korea
Period Description
1990s • 1997. 12. It was revised to “Act for Promoting Renewable Energy Development, Use, and
Distribution”
2000s • 2002. 3. “FIT (Feed-In Tariff)” was introduced (The above Act)
• 2004. 12. It was revised “Act for Promoting New and Renewable Energy Development, Use,
and Distribution (the “Renewable Energy Act”)
• 2006. 9. Base Energy Plan shall include greenhouse gas reduction targets (the Renewable
Energy Act)
• 2010. 4. “RPS (Renewable Portfolio System)” was introduced instead of FIT (the Renewable
Energy Act)
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2. Introduction of FIT in 2002
• Background
– Renewable energy emerged as early as the 1990s, but its distribution was not active because of its lack of
economic viability.
– The government introduced FIT in 2002 as a direct subsidy program to encourage and accelerate adoption of
renewable energy.
27
3. The Regulatory Structure of RPS
• Background of Adopting RPS
– Despite FIT and other measures, production and supply of renewable energy grew only mildly in the 2000s.
As of 2009, the proportion of renewable energy supply stood at a mere 2.5% , which would make it difficult to
meet the 2030 target of 11%.
– To adopt a new policy paradigm to spur renewable energy adoption and promote related industry, it is determined
in 2008 to terminate FIT after 2011 and replace it with RPS in 2012.
– New FIT subsidies have not been provided since 2012, but the outstanding subsidies will be continued until the
designated period of 15 or 20 years (as late as 2031).
Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Rate(%) 2.0 2.5 3.0 3.0 3.5 4.0 5.0 6.0 7.0 8.0 9.0 10.0
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3. The Regulatory Structure of RPS (continued)
29
3. The Regulatory Structure of RPS (continued)
• Operating Mechanism
Government
Sets target, allocates mandatory quota, manages RECs
Power Supplier A
PPAs
Renewable Electricity Power Supplier B
Supplier A
Renewable Electricity Power Supplier C End Customers
Supplier B
Sell RECs
Renewable Electricity
Sells
Supplier C PPAs
Electricity
Grid connection
KEPCO
(delivery and
distribution)
• Achievement of RPS
– RPS implementation ratio: 64.7%(2012) → 67.2%(2013) → 78.1%(2014)
– From 2002 to 2015, renewable energy showed an annual growth of 12.1% on average. As of 2015, the
proportion of renewable energy reached 4.5%. While this growth is promising, the proportion falls short of that
of developed countries.
[Proportion of Renewable Energy ]
REA revised
FIT introduced
Kyoto
Protocol
New Climate
Introduced
Change Regime
introduced
REA
introduced
RPS introduced
Marine [값]
Geothermal
[값]
Biomass [값]
Waste
[값]
33
5. New President’s Energy Policies
Source: http://www.koreaherald.com/view.php?ud=20170510000794
34
5. New Administration’s Energy Initiatives
Source: Government Press Release (2017. 8.)
i) Coal Power
– Early retirement of power plants (total 7 units) and improvement of environmental facilities to reduce pollutant
emissions in half by 2030
– Ban construction of new coal power plants, and change coal power plants under construction into clean LNG
power plants
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