Carbon capture, utilization and storage (“CCUS”), which is a process of capturing carbon dioxide from industrial operations for inland or underwater storage or for reuse to produce high-value materials, has attracted increasing attention as a major means to respond to climate change and achieve carbon neutrality. CCUS technology is divided into (i) carbon capture and storage (“CCS”) technology, which captures and permanently stores carbon dioxide, and (ii) carbon capture and utilization (“CCU”) technology, which uses captured carbon dioxide for the production of industrial raw materials and products. Carbon injection and operation technology and biological conversion technology were selected among the “100 core technologies for Korean-style carbon neutrality” on May 19, 2023.
However, there are challenges to pursuing CCUS opportunities. For example, there are approximately 40 individual laws that must be applied mutatis mutandis to operate CCUS-related businesses. In addition, there is insufficient legal basis to support such businesses. Further, it is difficult to ensure consistency in policy implementation because there is no clear division of labor among competent ministries.
To address the above, the Act on the Capture, Transportation, Storage, and Utilization of Carbon Dioxide (the “Act”) was promulgated on February, 2024. The Act will take effect one year after its promulgation. The main provisions and implications of the Act are as follows.
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Establishment of Legal Basis for Operation of Carbon Capture and Transportation Businesses
A business entity that intends to engage in a business of installing and operating carbon capture facilities shall report its plan for installing and operating carbon capture facilities to the Minister of Trade, Industry and Energy (“Minister”) (Article 7). A business entity that intends operate a carbon transport business using a certain means of transportation shall have certain facilities and prepare documents to obtain approval from the Minister (Article 8).
When a business entity that has obtained approval for carbon transportation business intends to install pipelines for transporting carbon dioxide, it shall establish safety management regulations and obtain approval from the Minister before operating the pipelines (Article 9). The above business entity shall also appoint a safety manager, report such appointment to the Minister (Article 10), and undergo regular or occasional safety inspections on pipelines conducted by the Minister (Article 11).
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Provision of Legal Basis for Operation of Carbon Storage Business and Imposition of Obligation to Ensure Safety Management
A business entity that intends to conduct exploration to discover a location to install an inland or underwater carbon storage facility shall prepare certain documents and obtain approval from the Minister. The above business entity shall further submit results of exploration to the Minister within three years from the date of obtaining approval for exploration (Article 13). The Minister may select a candidate site for storage from (i) the location applied for by the business entity that submitted results of exploration and (ii) a mining area where the mining right has expired, among others (Article 14). When the Minister selects a candidate site for storage, he/she shall announce the site’s location (Article 15).
A business entity that intends to operate a carbon storage business on a candidate site for storage shall prepare certain documents, obtain approval from the Minister, and register for the use of the area selected as the candidate site for storage to the Minister (Article 18). A business entity that has obtained approval for carbon storage business shall ensure that carbon dioxide does not contain certain impurities and shall compress carbon dioxide for injection and storage in compliance with the standards (Article 27). The above business entity shall also take necessary measures to prevent carbon dioxide leakage and fulfill other safety management requirements including undergoing regular or occasional inspections (Article 28).
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Introduction of Various Support Programs to Promote the CCUS Industry
Under the Act, upon receiving an application from a mayor or governor who has established a cluster development plan to ensure synergy effects between CCUS-related companies and their support facilities, the Minister shall have the Carbon Neutral Committee review the application, designate a CCUS cluster, and announce the designation (Article 29). The Government may carry out projects necessary for the creation and promotion of such cluster and provide subsidies for necessary costs (Article 30).
The Act provides a legal basis for a business entity that installs and operates carbon capture facilities to supply carbon dioxide to R&D and demonstration facilities and workplaces for the purpose of carbon utilization, as a first step toward developing CCU technology, which is still in its early stages. The amount of carbon dioxide supplied by the business entity may be taken into account when calculating or certifying the amount of greenhouse gas emissions according to the target management system for greenhouse gas emissions or the emissions trading system (Article 33). The Act also established a system for certifying technologies and products using captured carbon dioxide (Article 34) and a system for verifying companies specializing in carbon utilization (Article 35).
In addition, the Act includes support for demonstration projects, including financial, administrative, and technical support for business entities participating in demonstration projects using CCUS technology (Article 37) as well as licensing for demonstration projects and reduction of fees for occupancy or use of public waters (Article 38). The Act also establishes an institutional foundation to promote CCUS utilization, such as subsidies and loans for R&D expenses (Article 39) and permission to invest in climate response funds (Article 40).
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Implications
Once the Act takes effects, CCUS projects, which have been of interest to many companies, and the Government’s support programs to promote CCUS can actually operate under the law. If so, CCUS will contribute to efforts to respond to the climate crisis and establish carbon-neutral facilities as a last resort to reducing carbon dioxide emissions already released into the atmosphere. In particular, according to the nationally determined contributions for 2030, the reduction target for carbon dioxide emissions using CCUS was increased from 10.3 million tons (October 2021) to 11.2 million tons (March 2023). The Act, which provides support for CCUS technology development and demonstration projects, will also contribute to reducing greenhouse gas emissions.
CCUS requires advanced technology related to the process of capturing carbon dioxide and procedures for measuring and certifying greenhouse gas reductions. Therefore, it is essential to simultaneously promote the process industry related to the above. Under the Act, a new industrial ecosystem will be systematically promoted and supported, led by large-scale facility investments by businesses, which is expected to create significant employment opportunities. However, the Act stipulates registration requirements for carbon capture businesses, approval process for carbon transportation business, and permission process for carbon storage business to ensure the systematic establishment of CCUS. The Act will also ensure the safety of people’s lives and property through safety management regulations for pipelines and storage monitoring.
The Act mandates that specific licensing standards and procedures for CCUS business and various specific programs to promote clusters or CCUS industry be prescribed by Presidential Decree or Ordinance of Minister. As such, companies need to continue to pay attention to such standards, procedures, and programs to be specified in subordinate laws and regulations.
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[Korean Version]
