Sustainability of our planet and major industries

In the "2023 United In Science" report dated Sept. 14, 2023, the World Meteorological Organization (WMO) stressed that current responses to the climate crisis are deviating from the recommended path to carbon neutrality. Worldwide emissions of greenhouse gases (GHG), the main cause of the climate crisis, need to be reduced by 45 percent by 2030, under the Paris Agreement.

However, GHG emissions are estimated to have actually increased in 2022 and the first quarter of 2023. This phenomenon has not gone unnoticed: the world is groaning due to heavy rains, extreme heat, forest fires, etc. These events are becoming ever more frequent.

Storm Daniel, the deadliest Mediterranean cyclone, flooded Libya taking more than 20,000 lives. Between June and August, many countries recorded the highest temperatures on record. Earlier this year, wildfires scorched about 176,000 square kilometers of Canada, roughly seven times the average area affected by wildfires over the past decade in that country.

On Sept. 20, Antonio Guterres, the secretary-general of the United Nations, opened the U.N. climate ambition summit in New York by warning “humanity has opened the gates to hell” and “we are decades behind” the transition to clean energy.

The key to GHG reduction is converting at least 70 percent of required energy into renewable energy. But the world continues to rely on fossil fuels, for more than 80 percent of primary energy consumption. In addition, countries have self-managed the speed of their energy transition, focusing on internal benefits for the past 30 years, and ultimately failing to jointly respond to the global crisis.

Further exacerbated by weakened international cooperation due to the Russo-Ukraine war and U.S.-China trade competition, we are now observing fragmented responses to the climate crisis, mainly driven by the U.S. and EU. The U.S.' Inflation Reduction Act is providing various incentives for clean energy investments within the U.S., while the Carbon Border Adjustment Mechanism adjusts EU import prices based on their associated carbon emissions during manufacturing outside of the EU.

This trend has a significant impact on South Korea, an open economy where trade constituted 85 percent of its GDP in 2021.

The electric vehicle (EV) subsidy revision that France announced on Sept. 20 is a fitting example. Under this new change expected to come into effect in 2024, EV subsidies (including imports) will vary depending on the volume of GHGs emitted during their production and transportation. In other words, the volume of GHG emitted during the production of parts, assembly and transportation will determine the subsidy allotted, thereby making it more difficult to sell EVs in France without these subsidies. Considering that GHG emissions depend on the use of electricity generated from renewable energy and clean hydrogen, it is critical for South Korea to quickly proceed with its energy transitions.

Ember, a UK-based environmental think tank, published the Global Electricity Review 2023 in April, indicating that wind and solar reached a record 12 percent of global electricity in 2022, more than double the 4.6 percent figure evident when the Paris Agreement was signed in 2015. Three of the top five renewable energy countries are located in Asia. More importantly, our trade competitors, China (14 percent) and Japan (11 percent) are way ahead of Korea's 5 percent.

In this regard, a daily newspaper analyzed 19 Korean companies ― out of the top 30 largest companies by revenue ― that published their renewable energy figures, and found that the average ratio of renewable energy to entire electricity consumption was 10.6 percent. Hyundai Motors Group and Kia Corporation remained at or around the 5 percent mark. We certainly need to step up to enhance the export competitiveness of our companies via accelerated energy transition and increased use of renewable energy.

We also need to pay attention to GHG emissions during the transportation of our goods. When we export goods to the EU, for example, long-distance shipping is inevitable. If we can increase the use of renewable energy in transport vessels, we can ultimately enhance the export competitiveness of our goods.

Further, South Korea’s shipbuilding industry can take advantage of its expertise to construct vessels that utilize methanol as a low-carbon fuel. In fact, HD Korea Shipbuilding & Offshore Engineering handed over the first of 19 methanol-fueled container ships last July to Maersk, the world’s largest shipping company.

Automobiles, steel, batteries and shipping are the major industries that drive South Korea’s economy. As the international community has started to set the energy transition as the standard for the competitiveness of goods, it is important to accelerate our domestic energy transition to make these major industries economically sustainable.

To achieve this goal, the government needs to expand various support systems and subsidies for these industries. Corporations need to accept increased costs for utilities, parts, raw materials and transportation, and consumers need to pay higher energy expenses. If they are still unwilling to pay for the energy transition costs vital to pass a sustainable planet to the next generations, which we have campaigned for the past 30 years, we cannot force them to do so. However, what if these costs are also necessary for maintaining our major industries, which this generation has taken advantage of?

In the end, the acceleration of energy transition is the means of securing sustainability for the planet and major industries, from which we maintain our daily lives.

Kim Sung-woo is head of Environment & Energy Research Institute at Kim & Chang.