Electric car incentives in Korea are double-edged sword
An electric car charging station in Jongno-gu, Seoul on Aug. 4, 2019 / Yonhap
By Nikola Medimorec
We are in the middle of a climate crisis that can be only stopped if all the major parts of our lifestyles and industries transform quickly and shift away from the use of fossil fuels.
The transport sector currently contributes to 14 percent of global greenhouse gas emissions, and energy used by transport is almost completely based on fossil fuels. There is a clear need to divert from vehicles with combustion engines, not only because of their impact on the environment but also to improve local air pollution. Besides the more intense summer heat and extreme weather events, citizens in Seoul and the rest of Korea are exposed to high air pollution levels and traffic noise.
A way to decrease the dependency on fossil fuels in transport is through the use of electricity and hydrogen. But only 2 percent of cars on Korean streets are battery-electric cars or hydrogen fuel cell electric vehicles (FCEVs).
To accelerate the uptake, subsidies are being offered for the purchase of battery-electric cars and FCEVs. It is a combination of national subsidies (ranging from 4.2 million won to 9 million won) and additional local subsidies (between 4.5 million won and 10 million won). This means that up to 19 million won in government support is provided for the purchase of a new car. For comparison, the German government just announced that it will raise the purchase subsidies for electric vehicles (EVs) from 3,000 euros to 6,000 euros (roughly 7.5 million won).
Additionally, there are incentives which enable free (or discounted) parking, 50 percent on tollgate fees (which will only exist until the end of this year) and lower vehicle taxes. There are car models that come along with free charging at public stations and these costs are paid by the respective car company. Daegu, for example, provides free charging at every public charging station for anyone who is registered to their program.
One issue of the purchase subsidies, which are the main drivers of the electric car uptake in Korea, is that the contingent is limited and lower than the actual demand. Around 34,000 EVs were sold in Korea in 2018 because that's the number of vehicles that the national and local government decided to support through the purchase subsidies. So far, around 30,000 EVs have been sold in 2019 and again, the final numbers will just meet the contingent covered by subsidies. A lot more people want to have an eco-friendly vehicle, but, of course, nobody wants (or can afford) to acquire a vehicle without the purchase subsidies.
In the case of Germany, which gives purchase subsidies that are just a third of what Korea does, the recent increase in incentives was highly criticized and the public sees it as an unfair approach: Instead of supporting the purchase of a new car, the government should incentivize the use of public transport, rail and cycling. Further, the costs for supporting the purchase of EVs shouldn't be covered by the taxpayer but rather the car companies.
An alternative approach can be found in Norway, the country with the highest share of EV sales worldwide. Here, the major incentive is to exempt EVs from the 25 percent VAT which usually applies to vehicle purchases. EV owners also don't pay any import taxes. So, instead of having the government provide financial support, the government just omits taxes and makes the eco-friendly vehicle in this way more price-competitive. However, as Korea only applies around 10 percent tax for a new car, it won't work as well as in Norway. We would first need a stronger framework that disincentives the purchase of new vehicles.
Policies are necessary to make the switch to a zero-emission vehicle attractive. But the current policies have the side-effect of more traffic (People with electric cars tend to drive more due to lower costs in charging, parking and highway use).
The Korean government recognizes the environmental, economic and social benefits of eco-friendly vehicles. According to the Ministry of Environment website, electric cars produce half of the CO2 emissions per kilometer of an average car, as well as drastically reducing noise and air pollution. But they are not completely emission free as the energy produced to charge EVs mainly originates from coal and fossil fuel sources. The zero emission potential of FCEVs and battery-electric cars can be only achieved if the energy used to power electric cars comes from renewable energy sources like solar and wind power.
Seoul eventually wants to become a “Solar City” that can power 1 million households by 2022 and have 1GW of power generated through photovoltaic cells. Within the old city gates, polluting vehicles will be fined starting Dec. 1 as part of Korea's first green transport zone. Seoul wants to transform 100,000 motorcycles into electric two-wheelers by 2025 and the capital region wants to replace all diesel buses to CNG, hydrogen or electric buses by 2027.
The sunset of the internal combustion engine is near. The question is only how well and quickly the transition to new technologies can be facilitated.
Nikola Medimorec works for the?
?and writes for the urban development website?
. He has a master's degree in geography from Seoul National University.