Government’s Commitment to Carbon Neutrality - Carbon Neutrality Framework Act, 2030 NDC, and Carbon Neutrality Scenarios

On September 24, 2021, the Framework Act on Carbon Neutrality and Green Growth (the “Carbon Neutrality Framework Act”) (to be effective on September 25, 2022) was enacted. Pursuant to the Carbon Neutrality Framework Act, the 2050 Carbon Neutrality Green Growth Committee approved a significant increase in the 2030 Nationally Determined Contributions (“NDC”) to 40% and two scenarios to accomplish carbon neutrality by 2050, all of which were later deliberated and approved at the Cabinet meeting on October 27, 2021. By declaring the 2030 NDC and 2050 carbon neutrality scenarios as national visions, the Carbon Neutrality Framework Act became the first legislation to mandate the implementation of carbon neutrality. Its key provisions are summarized as follows:

1. 2030 NDC

Target: 40% reduction from 2018 levels by 2030 (previous target: 26.3%)
The primary reduction measures for each sector are listed below:

Sector	Implementation Plan	Reduction (million ton CO₂eq) (Reduction rate from 2018 levels)
Conversion (electricity, heat generation)	Decrease coal-powered electricity generation (electricity generation ratio (41.9% in 2018 → 21.8%)) Expand renewable energy (6.2% in 2018 → 30.2%)	149.9 (44.4%)
Industry	Convert steel process (electric furnaces, etc.), petrochemical raw materials (bio lead, etc.), fuel and raw materials for cement (bituminous coal → waste synthetic resin), etc.	222.6 (14.5%)
Building	Vitalize zero-energy construction, supply high-efficiency energy devices, manage smart energy, etc.	35 (32.8%)
Transportation	Establish a transportation system centered on diverse offerings of public transportation (reduction in driving mileage), expand supply of pollution-free vehicles, increase bio-diesel mixing rate (3% → 8%), etc.	61 (37.8%)
Agriculture	Improve rice field management methods, reduce fertilizer usage, expand supply of low methane feeds, reduce nitrogen from livestock excreta, etc.	18 (27.1%)
Waste	Reduce wastes/expand recycling, supply bioplastics, and collect methane gas such as landfills	9.1 (46.8%)
Hydrogen	Support development and commercialization of hydrogen electrolyte technology, expand supply of byproduct/imported hydrogen (supply ratio: 12.9% for hydrogen electrolyte, 39.7% for extraction, 47.4% for byproduct/import)	7.6%
Others	Reduce fugitive emission	3.9%
Absorbent	Secure absorption sources by restoring forest ecosystems, expanding new afforestation such as urban forests, and creating new coastal and inland wetlands	-26.7
CCUS (Carbon Capture, Utilization, and Storage)	Expand Carbon Capture, Utilization, and Storage (CCUS) through commercialization of R&D, various institutional support, and procure large-capacity storage through joint projects with multiple ministries	-10.3
Overseas Reduction	(While trying to develop domestic reduction measures, overseas reduction measures may be used as supplementary measures.)	-33.5
Total		436.6 (40%)

2. 2050 Carbon Neutral Scenarios

With a national vision to promote a harmonic development of the environment and economy and achieve carbon neutrality by 2050, the government plans to establish a national implementation strategy (Article 7). To this end, a framework plan for national carbon neutrality green growth will need to be established and executed every five years, and the 2050 Carbon Neutrality Green Growth Committee that reviews and deliberates on key policies and plans for the execution of carbon neutrality and promotion of green growth will be established directly under the President (Article 15). In addition, local governments will also be allowed to establish their own 2050 Regional Carbon Neutrality Green Growth Commission.

Two scenarios to achieve net “zero” emissions have been presented. Scenario A is to suspend coal-powered electricity generation, and Scenario B is to actively utilize CCUS and other removal technologies while keeping LNG-powered electricity generation.

Primary reduction measures for each sector are listed below.

Sector	Implementation Plan
Conversion (electricity, heat generation)	Suspend coal-powered electricity generation and significantly expand renewable energy Scenario A: Completely suspend electricity generation that uses thermal power, Scenario B: Keep a certain level of LNG-powered electricity generation
Industry	Introduce hydrogen-reduction in the steel making process, and convert fossil fuels and raw materials used in the cement, petroleum, chemical, and refining processes to renewable fuels and raw materials
Building	Enhance energy efficiency of buildings (zero energy buildings, green remodeling) Supply low-carbon and clean energy (sunlight, geothermal, water heat, etc.) for cooling, heating and hot water
Transportation	Expand supply of pollution-free vehicles (by more than 97% in Scenario A, by more than 85% in Scenario B), and expand use of public transportation and personal mobility
Agriculture	Expand low-carbon farming, expand circulation of resources relating to livestock excreta, and establish low-carbon livestock management systems
Waste	Expand waste reduction and recycling, replace bioplastics, and utilize biogas energy (recovery of methane gas, etc.)
Hydrogen	Hydrogen demand is expected to be around 27.4~27.9 million tons: produce 100% green hydrogen in Korea (Scenario A), partial supply extracted hydrogen or byproduct hydrogen (Scenario B)
Absorbent	Secure absorption sources (25.3 million tons of absorption) by restoring forest ecosystems, expanding new afforestation such as urban forests, and creating new coastal and inland wetlands
CCUS	Manage 55.1 million tons in Scenario A and 84.6 million tons in Scenario B (CCUS throughput may differ depending on emissions by each sector)

3. Others

The government will implement various policies for greenhouse gas (“GHG”) reduction, including: climate change impact assessments for businesses with high GHG emissions (Article 23), a budget policy for GHG reduction recognition, an emission trading system (Article 25), a target management system (Article 27), carbon neutral cities, regional energy conversion support, green buildings, green transportation, expansion of carbon sinks, storage technology using carbon capture, international mitigation businesses, and establishment of a GHG terminal information management system. Furthermore, to secure necessary resources, a climate response fund will also be established (Article 69).

Through the Carbon Neutrality Framework Act, which legislates carbon neutrality and GHG reduction objectives, we expect that central administrative agencies, local governments, and public institutions will come up with various measures going forward. Subsequent legislations (enactment and amendment of relevant laws) may also follow. Moreover, given the ratio of manufacturing businesses in the Korean industry (26.1% in 2020) and the shorter time period from the peak of emissions to carbon neutrality (32 years) compared to other countries, the 2030 NDC and the 2050 Carbon Neutrality Scenarios are indicative of the Korean government’s strong commitment to carbon neutrality. Now that responding to climate change and mitigating GHG emissions are legal obligations that affect all industries, companies are urged to pay close attention to the direction of legal developments related to carbon neutrality.

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