[Open Forum] Carbon Neutrality Scenarios Need Economic and Practical Reassessment

The 2050 Carbon Neutrality Scenario appears set to be implemented in earnest starting in 2022. According to the Climate Carbon Policy Bureau and the Resource Circulation Bureau, a new greenhouse gas reduction system based on the Framework Act on Carbon Neutrality and Green Growth for Coping with the Climate Crisis is also about to be implemented. As one unrealistic plan after another is being presented without any reflection of business realities, a widespread sense of crisis is growing that corporate management will be stifled.

The government’s 2050 Carbon Neutrality Scenario sets overly ambitious targets that fail to take into account Korea’s manufacturing-centered industrial structure. According to the scenario, the industrial sector must cut carbon emissions by 80% by 2050. The cost that businesses alone will have to bear is expected to exceed KRW 199 trillion, and there are concerns that this burden will ultimately lead to reduced employment and weakened corporate competitiveness. In other words, businesses and the public will end up paying the price for excessive optimism.

The two final versions of the 2050 Carbon Neutrality Scenario announced by the government at the end of last year both include plans to phase out coal-fired power generation. Most forecasts suggest that if coal power is discontinued, electricity rates will inevitably rise. If fuel costs increase, it is only natural to expect that the added burden on businesses will constrain management. Most major industries are required to reduce emissions by more than 95% by completely replacing petrochemical raw materials with eco-friendly materials. However, the technological support needed to achieve this remains insufficient.

The carbon reduction targets were revised more than three times in 2021 alone, and throughout that process, the realities and concerns of businesses were ignored. Six key industries are expected to bear a total cost of KRW 199 trillion to achieve carbon neutrality by 2050. Businesses are effectively being forced to shoulder costs that are realistically difficult to bear. The government’s excessive optimism will ultimately be borne by the public. The increased burden on businesses will cause job contraction and unemployment, creating a vicious cycle that gives rise to additional social problems.

In particular, the plan to eliminate coal-fired power generation lacks realism. Coal power still serves as a baseload power source, and compared with other renewable energy sources, its economic efficiency is on an incomparably higher level. The commercialization of renewable energy still has a long way to go. Renewable sources such as solar and wind power show wide fluctuations in output depending on weather conditions, and it remains uncertain whether technological advances enabling stable supply and demand will be possible by 2030. Experts argue that a complete phaseout of coal-fired power generation is effectively unrealistic. Businesses will end up paying the price for this as well.

Expanding nuclear power generation is not included in the carbon neutrality scenario. This stands in contrast to major countries such as the United States, Japan, the United Kingdom, and China, which are actively utilizing nuclear power as a means of achieving carbon neutrality. Yet nuclear power is currently the most environmentally friendly form of power generation available at today’s level of technology, producing the least pollution while providing a stable electricity supply. The scenario presents hydrogen turbines (ammonia power generation) as a replacement energy source for nuclear power, but this is effectively impossible because the technology is not realistically ready. The government must acknowledge that there is still no realistic eco-friendly alternative capable of replacing nuclear power and prepare practical measures that make use of nuclear generation.

The carbon neutrality scenario currently being promoted by the government does not reflect realistic business conditions at all. It is true that businesses should participate in environmental protection, but plans that lack realism inevitably demand enormous sacrifices from them. One-sided announcements made without sufficient agreement with businesses will ultimately suppress corporate management and lead to economic deterioration.

The government needs to reexamine the economic viability and realism of the 2050 Carbon Neutrality Scenario and redesign it at an achievable level. In particular, any such effort must be premised on serious consideration of the electricity rate increases and added corporate burdens that carbon neutrality will entail. Since the competitiveness of Korean industry is closely tied to electricity rates, the government must establish a realistic plan to maintain national competitiveness and promote business activity.

Juwon Lee, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 탄소중립 시나리오, 경제성ㆍ현실성 재검토해야

Author: Ju-won Lee

Date: 2022-03-18

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=9&idx=24622