On January 9, 2024, the National Assembly passed the Act on the Capture, Transportation, Storage and Utilization of Carbon Dioxide (the “CCUS Act”), which was promulgated on February 6, 2024.
Carbon Capture, Utilization and Storage (“CCUS”) is a process of capturing carbon dioxide from industrial operations for inland or underwater storage or for reuse to produce high-value materials, and it 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 utilizes the captured carbon dioxide for the production of industrial raw materials and products. Carbon injection/operation technology and biological conversion technology were selected among the “100 core technologies for Korean-style carbon neutrality” on May 19, 2023. In addition, major Korean companies are also actively pursuing technology developments and businesses, focusing on the importance of CCUS technology.
Some challenges to pursuing CCUS opportunities include the following: (i) there are approximately 40 individual laws that must be applied mutatis mutandis to operate CCUS-related businesses, (ii) there is inadequate legal basis to support such businesses, and (iii) the absence of a clear division of labor among competent ministries makes it challenging to maintain consistency in policy implementation. The CCUS Act was conceived to overcome those challenges.
|
1.
|
Establishment of Legal Basis for Operation of Carbon Capture and Transportation Businesses
-
A business entity that intends to engage in the business of installing and operating carbon capture facilities must report its plan for installing and operating such facilities to the Minister of Trade, Industry and Energy (the “Minister”). Additionally, a business entity that intends to operate a carbon transport business using a certain means of transportation must prepare certain facilities and documents to obtain approval from the Minister.
-
When a business entity that has obtained approval for a carbon transportation business intends to install pipelines for transporting carbon dioxide, it must establish safety management regulations and obtain approval from the Minister before operating the pipelines. The above-mentioned business entity must also appoint a safety manager and report such appointment to the Minister and undergo regular or occasional safety inspections on the pipelines, which will be conducted by the Minister.
|
|
2.
|
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 must prepare certain documents and obtain approval from the Minister. The above-mentioned business entity must further submit the results of the exploration to the Minister within three years from the date of obtaining approval for exploration. The Minister may select a candidate site for storage from (i) the location applied for by the business entity that submitted its results of exploration, and (ii) a mining area where the mining right has expired, among others. When the Minister selects a candidate site for storage, he/she will announce the site’s location.
-
A business entity that intends to operate a carbon storage business on a candidate site for storage must 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. A business entity that has obtained approval for a carbon storage business must ensure that carbon dioxide does not contain certain impurities and must compress carbon dioxide for injection and storage in compliance with the standards. The above-mentioned business entity must also take necessary measures to prevent carbon dioxide leakages and fulfill other safety management requirements, including undergoing regular or occasional inspections.
|
|
3.
|
Introduction of Various Support Programs to Promote CCUS Industry
-
Under the CCUS 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 will have the Carbon Neutrality Commission review the application, designate a CCUS cluster, and announce the designation. The Government may carry out projects necessary for the creation and promotion of such clusters and provide subsidies for necessary costs, or reduce or exempt rents for national and public properties.
-
The CCUS 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. The CCUS Act also establishes a system for certifying technologies and products using captured carbon dioxide and a system for verifying companies specializing in carbon utilization).
-
In addition, the CCUS Act supports demonstration projects by (i) providing financial, administrative, and technical support for business entities participating in demonstration projects using CCUS technology, and (ii) licensing for demonstration projects and reducing fees for occupancy or use of public waters. It also establishes an institutional foundation to promote CCUS utilization, including (i) subsidies and loans for R&D expenses, (ii) permission to invest in climate response funds, (iii) national and local tax reduction, and (iv) special provisions on optional contracts for national and public properties.
|
CCUS projects, which have been of interest to many companies, and the Government’s assistance programs to promote CCUS can actually operate under the CCUS Act. 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 (“NDCs”) 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 CCUS 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 related industries. Under the CCUS 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 CCUS Act stipulates registration requirements for carbon capture businesses, approval process for carbon transportation businesses, and permission process for carbon storage businesses to ensure a systematic establishment of CCUS. The CCUS Act will also ensure the safety of people and property through safety management regulations for pipelines and storage monitoring.
The CCUS Act mandates that specific licensing standards and procedures for CCUS business and various specific programs to promote clusters or the CCUS industry be prescribed by Presidential Decree or an Ordinance of the Minister. As such, companies are advised to review the standards, procedures, and programs to be specified in subordinate laws and regulations.
[Korean Version]
