New climate ministry sparks industry fears over costs, competitiveness

The signboard of the environment ministry is replaced with that of the newly launched Ministry of Climate, Energy and Environment at Government Complex Sejong, Tuesday. Yonhap

The Ministry of Environment has assumed energy policy responsibilities and been restructured as the Ministry of Climate, Energy and Environment.

While the move signals a stronger government commitment to climate action and renewable energy, it has also sparked concerns among policymakers and business executives over a possible weakening of Korea's export competitiveness and rising electricity costs.

Energy policy had long been overseen by the Ministry of Trade, Industry and Energy. But under President Lee Jae Myung’s government reorganization — based on his pledge to strengthen the response to the climate crisis — the energy policy, power policy, renewable energy, hydrogen economy and nuclear industry bureaus have been shifted to the new climate ministry.

It is the first time in 32 years that energy policy has been split from industrial policy, a reversal of the 1993 merger that combined the former Ministry of Commerce and Industry with the Energy Resources Ministry.

The climate ministry officially launched on Wednesday, but concerns that first arose when the reorganization was proposed continue to mount.

In a report published by the National Assembly Research Service in August, it cautioned that placing both climate regulation and energy industry promotion under one ministry risks allowing one role to dominate the other.

It also warned that separating energy policy from industrial policy could undermine the competitiveness of Korea’s manufacturing-reliant economy, especially in energy-intensive sectors like artificial intelligence (AI), semiconductors and data centers.

Another concern centers on the “dualization” of industry and energy policy.

Under the government plan, most bureaus related to energy policy have been shifted to the new climate ministry, while the resource industry bureau stays with the industry ministry. Nuclear energy oversight is split as well, with construction and operations moving to the climate ministry but export strategy remaining under the industry ministry.

The reshuffle leaves Korea Electric Power Corp., state-run power generators and Korea Hydro & Nuclear Power (KNHP) under the climate ministry, while the Korea National Oil Corporation and Korea Gas Corporation remain with the industry ministry.

Industry officials warn the split could erode policy consistency, with the KHNP labor union releasing a statement saying that separating industry and energy will weaken national competitiveness.

Businesses fear that the shift toward a more regulation-driven approach could drive up electricity costs and add to their operating burdens, given the differences between environmental and industrial approaches to energy policy.

Kim Sung-hwan, minister of climate, energy and environment, delivers an inaugural speech during the ministry’s launch ceremony at Government Complex Sejong, Wednesday. Yonhap

In addition, with Environment Minister Kim Sung-hwan now leading the new climate ministry, the nuclear industry is wary of what it sees as the risk of a “second nuclear phaseout,” citing his long-standing opposition to nuclear power.

The Korean Nuclear Society urged the government to reconsider the restructuring, warning that the creation of the climate ministry undermines the foundation of nuclear policy and poses a structural contradiction that could seriously damage the nuclear ecosystem.

Amid the backlash, the climate and industry ministries said they will step up coordination to avoid policy confusion.

In a speech at the inauguration of the climate ministry, Kim pledged to position the new ministry as the “control tower” for climate action, vowing to set out a clear roadmap for decarbonization.

He noted that climate policy had previously been managed by the environment ministry while emission-reduction tools were handled by the industry ministry, making it difficult to meet targets.

“Now that planning and execution are under one roof, we will push ahead with a green transition across all sectors without hesitation,” he said.