While a lot of international attention has been paid to President Moon Jae-in’s policies on North Korea, his domestic agenda has been largely ignored by outside observers.
A case in point is his energy policy, which is likely to revive the “green growth initiative” of President Lee Myung-bak and place Korea once again at the forefront of efforts to reduce global dependence on fossil fuels. This goal was largely neglected during the administration of President Park Geun-hye, who appeared to deliberately shun the policies of her predecessor and political rival.
During the election campaign, Moon said he would reduce the use of coal and nuclear power by replacing them with natural gas and renewables such as solar and wind power. He also said he wanted to phase out diesel cars in favor of electric vehicle and traditional gasoline-fueled models.
His program has been prompted by several factors. One is the worsening air pollution in Seoul, which has been blamed on the widespread use of diesel cars. Another is continuing concern about the safety of nuclear power in wake of several scandals involving the industry in the last several years.
These measures could have a big economic impact. For example, Korea has become one of the world’s biggest users of nuclear energy and has had ambitions to help lead the global nuclear power industry by exporting nuclear power plants. KEPCO, the state-run power company, was recently mentioned as a possible buyer of the Westinghouse nuclear unit from Toshiba in an effort to augment its international competitiveness in the nuclear sector.
But if Moon decides to scrap or suspend the construction of new nuclear plants, it will put paid to those ambitions. That may be a good thing considering the nuclear industry is facing problems worldwide due its expense when cheaper energy alternatives are becoming increasingly available.
Under Moon’s proposal, the share of energy generated by nuclear power would fall from 30 percent to 18 percent by 2030. Meanwhile, the use of natural gas would increase from 22 per cent to 37 percent. Since Korea is entirely dependent on liquefied natural gas imports, the government would cut consumption taxes to encourage its use.
A potential obstacle to the LNG strategy is that prices in Asia are largely tied to the price of oil in long-term supply contracts, which have often been the subject of complaints in the region because it keeps the price of natural gas high.
Buyers in the North American and Europe rely more on spot markets, where the prices fluctuate according to demand. There are increasing hopes, however, that as global supplies of LNG continue to grow, it will result in more market-based prices for Asia as well as the development of local spot markets.
The increased use of renewables such as wind and solar, which are expected to account for 20 percent of energy needs by 2030 (up from 6 percent now), will give a boost to Korea’s growing energy technology sector, which has become a leader in several areas such as energy storage systems that save energy produced by renewables for use at the most appropriate time.
But perhaps the biggest impact on business will be produced by the promised phasing out of diesel cars by 2030. Air quality in Korea has fallen to 80th globally from 43rd since 2014, according to Yale University’s Environmental Performance Index.
There are several causes for this, but one has been the growth in diesel cars on Korean roads, which produce ultrafine dust and nitrogen dioxide emissions. Public awareness about this problem was raised by the scandal involving fake emission readings for Volkswagen cars.
Moon has proposed to raise taxes on diesel cars and offer financial incentives to encourage the purchase of electric vehicles or cars running on gasoline. This will benefit Korean carmakers in several ways.
One is Korean car companies, which have relied almost entirely on gasoline vehicle models, had been losing domestic market share to imported European diesel cars.
In addition, the government push for electric vehicles, including adding charging stations around the country, will be a shot in the arm for the Korean electric vehicle industry. Companies like LG have already become global leaders in producing electric car batteries and Hyundai has been actively developing electric car models.
While Moon may face problems in pushing through much of his legislative agenda in the National Assembly because his party holdsonly about 40% of parliamentary seats, his energy policy may be one of the few areas that is likely to gain support across the political spectrum.
Energy thus could emerge as a bright spot for the Moon administration. It also means that Korea will once again be firmly set on the road to a cleaner and greener future.
John Burton, a former Korea correspondent for the Financial Times, is now a Washington,. D.C.-based journalist and consultant. He can be reached at firstname.lastname@example.org.