An analysis suggests that the burden of purchasing emission rights for companies according to the 4th emissions trading system allocation plan announced by the government last month is approaching 27 trillion won. The economic community argued that companies needed policy support such as transition finance, where the government bears part of the funds to be invested in transforming manufacturing processes and facilities in an eco-friendly manner.
On the 3rd, the Korea Economic Association estimated the cost of purchasing emission rights to be borne by companies over the next 5 years (2026-2030) as part of the 4th Emission Trading System allocation plan through a report on the 'K-GX Implementation and Transitional Finance Revitalization Policy Challenges' at 26.9 trillion won.
At the State Council meeting last month, the government confirmed a national greenhouse gas reduction target (NDC) to reduce overall greenhouse gas emissions by 53-61% compared to 2018 by 2035. The industry has set a reduction target of 24.3 to 31% by 2035. On the other hand, the amount of pre-allocated greenhouse gas emissions credits decreased by 18.6% from the 3rd round (2021 to 2025).
Han Kyung-hyup analyzed that among the main industries, the cost of purchasing steel emission rights is the largest. It was estimated that steel was approximately 1.375.6 trillion won, and the semiconductor burden was 914.7 billion won. Refining oil (914.7 billion won), petrochemicals (435.2 billion won), and cement (215.6 billion won) were also burdened with the cost of purchasing emission rights.
The report suggests that a public-private cooperative transition finance ecosystem in which the government and private sector participate together is necessary to support the transition to clean energy in high-carbon emitting industries. Using the example of Japan as an example, Han Kyung-hyup explained that government-centered policy finance should be promoted from the initial market-building stage of transition finance.
Since 2021, Japan has established guidelines related to conversion finance and is using the government's financial support system, such as interest reduction. The Japanese government became the largest issuer of convertible bonds and issued the world's first 1.6 trillion yen (approximately 15 trillion won) national bonds in 2024. They are also promoting the issuance of government bonds worth a total of 20 trillion yen.
Han Kyung-hyup also proposed a plan to use part of the profits obtained by the government through paid allocation of emissions trading systems as resources for conversion finance. In fact, the European Union (EU) clearly establishes and manages the sources of financial income from paid allocations under the emissions trading system, such as innovation funds, modernization funds, and social funds.
Lee Sang-ho, Head of Economy, Trade and Industry Division, Han Kyung-hyup, said, “High-emission industries where it is difficult to reduce greenhouse gases in the short term are facing transition costs to respond to climate policies,” and emphasized that “there is a need for policy support to revitalize transition finance so that companies can smoothly carry out innovative technology development and secure international competitiveness.”
