Refiners, steelmakers hit with steep CO2 emissions cut

By Yoon Ja-young

The government's plan to revise its roadmap for decreasing greenhouse gas emissions is weighing on industries. Analysts say local businesses are more vulnerable to the plan since they are mostly big-energy consumers concentrating on exports.

While acknowledging that the country has to join the global efforts to cut carbon dioxide (CO2) emissions, businesses complain the government is putting too much pressure on them without sufficient preparation time.

“The biggest problem is the government didn't seek the opinions of businesses while making such decisions,” an official at a petrochemical company said. Big energy consumers such as oil refiners, petrochemical firms, steelmakers, cement and construction businesses expect up to trillions of won in additional burdens.

The Ministry of Environment recently unveiled a revision to its 2030 greenhouse gas emissions cut roadmap, which was prepared by the previous Park Geun-hye administration. In the previous plan introduced in December 2016, Korea promised to cut greenhouse gas emissions by 37 percent from its business-as-usual levels by 2030 following signing of the Paris Climate Agreement the previous year. This means Korea should reduce 315 million tons of emissions, while it is expected to emit 851 million tons for 2030 without any reduction efforts.

Among the 37 percent cut, 25.7 percent was scheduled to be slashed domestically while 11.3 percent, or 96 million tons, was to be slashed overseas, through joint reduction projects with other countries or purchases of emissions quotas from overseas.

However, there has been international criticism over the previous roadmap since as much as a third of the targeted cut will be done out of the country. The government thus came up with a revision, according to which only 16 million tons will be slashed overseas while the remaining 80 million tons will be reduced domestically.

Businesses gripe as they have to shoulder much of the increased reduction burden, compared with other CO2 emitters such as power generators, buildings and transportation.

In the previous roadmap, industries were supposed to cut emissions by 11.7 percent compared with 2030 BAU of 481 million tons, but the revision raised their target to 20.5 percent. They will have to cut 98.6 million tons of emissions, up from the previous 56.4 million tons. They should make huge investments to enhance energy efficiency or improve the manufacturing process. If they don't meet the target, they will have to buy quotas from the market.

Analysts expect the measure to weigh on businesses.

“The ratio of manufacturing that consumes much energy is high among Korean industries. As the industry is also focused on exports, the emission cut target will deal a blow to the industries,” said Kim Young-il, global strategist at Daishin Securities.

“Since there aren't low-cost measures with which the industries can cut emissions, they will have to rely on emissions quota purchases for much of the reduction,” he added, picking steelmakers, electronics and petrochemicals as the sectors hit hardest by the revision.