On December 19, 2023, the Ministry of Trade, Industry and Energy (the “MOTIE”) issued an administrative notice of the Proposed Notification on the Operation of Clean Hydrogen Certification System (the “Proposed Notification”), which specifies the scope of clean hydrogen and certification details. Previously, when the Enforcement Decree of the Hydrogen Economy Promotion and Hydrogen Safety Management Act (the “Hydrogen Act”) was amended on November 30, 2023, the MOTIE only defined the term “clean hydrogen certification standards” broadly and deferred detailed and technical matters to be covered under the notification. Please refer to our previous newsletter (Link).

The Operation of Clean Hydrogen Certification System included in the Proposed Notification had also been discussed by the Sixth Hydrogen Economy Committee held on December 18, 2023.  

Grades of Clean Hydrogen and Certification Standards

The Proposed Notification utilizes the greenhouse gas emissions calculated by the life cycle assessment (the “LCA”), a technique for calculating and evaluating the CO₂ equivalent amount per hydrogen mass emitted during the process from raw material extraction to hydrogen production/import (including domestic/international transportation), as the standard for clean hydrogen certification (Article 2, Item 9, Article 13, and Article 14). This is in line with that of the EU regarding the measurement cycle of the clean hydrogen certification system to be based on “well-to-gate” (extraction to production). 

Under the Proposed Notification, the greenhouse gas emissions standard for clean hydrogen is established as “4kgCO₂eq/kgH₂” and is classified into four different grades based on the actual amount of greenhouse gas emissions as follows:
 

For the LCA of hydrogen, greenhouse gas emissions are further classified into direct emissions (Scope 1), indirect emissions (Scope 2), and other indirect emissions (Scope 3). Indirect emissions, for which it is difficult to ascertain applicable emission coefficients, will be calculated based on basic data on the supply of raw materials, etc. in the hydrogen production process, and the detailed calculation method and the calculated emissions will be reviewed in accordance with the procedures determined by the head of a clean hydrogen certification operating institution (Article 13).

Clean Hydrogen Certification Procedure

On December 28, 2023, the MOTIE designated the Korea Energy Economics Insitute as the certification operating institution, and the Korea Testing Certification Institute and the Korea Testing & Research Institute as the certification testing and evaluating institutions. 

Any business operator who intends to obtain a clean hydrogen certificate must first complete the construction of the relevant clean hydrogen facility, secure all necessary licenses and permits prescribed by the relevant laws and regulations, and then file an application with the head of a certification operating institution for confirmation of the facility subject to the issuance of the clean hydrogen certificate (Article 12). After the issuance of facility certificate by the certification operating institution, the clean hydrogen certificate for certified clean hydrogen production volume will be issued. Notably, the certified clean hydrogen production volume will be determined based on (i) the amount of hydrogen when the producer in Korea started to sell clean hydrogen for the first time, or (ii) the amount of hydrogen when the permission for unloading at a port was secured in case of overseas production (Articles 19 (1) through 19 (3)).

Special Cases for Calculation of Greenhouse Gas Emissions

The Addendum to the Proposed Notification provides that “the process from raw material extraction to hydrogen production shall be applied until the date separately determined by the Minister of the MOTIE in consideration of the technological level of the hydrogen industry” (Article 2 (1) of the Addendum). It also provides that “in calculating the final emissions, the amount of emissions generated by (i) procurement of raw materials for the purpose of hydrogen production, (ii) transport of CO₂ collected during the process of hydrogen production, and (iii) sea transportation of synthetic carriers after hydrogen production shall be excluded until the date separately determined by the Minister of the MOTIE in consideration of the technical level of the hydrogen industry.”

It is our understanding that the purpose of this provision is to temporarily exclude from the calculation of total greenhouse gas emissions (i) the amount of emissions from the process of domestic and international transportation, taking into account the unique nature of Korea where it is inevitable to procure clean hydrogen from overseas, and (ii) the amount of emissions from ships in consideration of the technology development trend of eco-friendly ships, etc.  

Implications

Based on the administrative notice, the MOTIE will finalize the Proposed Notification by early 2024. The Proposed Notification is meaningful in that it lays a foundation for a system to implement policies related to clean hydrogen, such as the auction market for clean hydrogen power generation, by setting specific standards and grades for clean hydrogen. It is also meaningful in that it presents the basic concept and direction of clean hydrogen, which is the sustainable goal and key driver to implement the hydrogen economy for the first time.

Once the Proposed Notification is finalized following the end of the public comment period, as a follow-up measure, the Korea Energy Economics Insitute, as the certification operating institution, will establish guidelines and various regulations on the operation of the clean hydrogen certification system before the opening of the auction market for clean hydrogen power generation. Therefore, companies that intend to obtain a clean hydrogen certification or prepare to participate in the auction market for clean hydrogen power generation should pay close attention to such details.

[Korean Version]