The government is reported to address green finance as a key agenda item at the Industrial Competitiveness Reinforcement Meeting (ICRM) in February. While U.S. President Donald Trump has withdrawn from the Paris Climate Agreement and implemented policies expanding fossil fuels, this is interpreted as a commitment from South Korea to continue its decarbonization transition.
According to the Ministry of Strategy and Finance, Ministry of Environment, and Ministry of Trade, Industry and Energy on the 4th, the government plans to discuss the green transition guarantee project as a key agenda item at the ICRM, which will be chaired by Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok on the 5th.
The green transition guarantee project aims to assist small and medium-sized enterprises with poor collateral strength in raising funds, even though they possess technology related to greenhouse gas reduction. The Korea Credit Guarantee Fund and the Technology Guarantee Fund provide guarantees, while the Ministry of Environment manages and oversees the project. The annual budget totals 140 billion won, and the scale of the guarantee supply amounts to 1.5 trillion won.
The green transition guarantee project consists of the climate response guarantee project and the green technology industry guarantee project. The climate response guarantee project targets corporations contributing to the reduction of greenhouse gases, with a guarantee supply scale of 1.2 trillion won. From 2022 to last year, the Ministry of SMEs and Startups and the Financial Services Commission operated the budget separately, but starting this year, the Ministry of Environment will take the lead. The green technology industry guarantee project, which targets corporations that own or develop technology, has a guarantee supply scale of about 280 billion won. This project was newly established this year to allow corporations in the early stages of technology development to benefit.
A government official noted, "Our corporations need to invest in facilities for carbon neutrality and low-carbon transition, but it is currently difficult for them to secure funding, which is why the government seeks to assist." The official added, "Although green bonds, loans, and funds already existed, it is meaningful to provide diverse funding methods according to the financial management conditions."
The government's emphasis on the green transition guarantee project at the ICRM is also interpreted as a necessity for the Korean industrial sector to continue its decarbonization efforts, regardless of the policies of the Trump administration. South Korea declared in October 2020 that it would achieve carbon neutrality (net zero – absorbing as much carbon dioxide as is emitted so that the concentration of carbon dioxide in the atmosphere does not increase) by 2050.
There are concerns regarding the weakening competitiveness of Korean corporations, particularly ahead of the implementation of the European Union's carbon border adjustment mechanism next year. This mechanism primarily stipulates that non-EU countries must pay taxes based on estimated carbon emissions when exporting steel, aluminum, and other products to the EU. Six items, including steel, aluminum, cement, fertilizers, electricity, and hydrogen, are included, with additional items expected to be gradually added. In particular, Korean steel and aluminum corporations that export significantly to the EU are expected to bear additional costs.
The government plans to discuss the impact of the Trump administration's policies on various industries at the ICRM meeting in February. It will assess the implications and risks associated with the Trump administration's policies on the automobile, secondary battery, semiconductor, steel, and shipbuilding industries and listen to the concerns of corporations. The heads of industry-specific associations are expected to attend.
Starting this month, the government has decided to expand the ICRM meetings to include both public and private sectors. The previous ICRM meetings were chaired by the deputy prime minister, with six officials attending, including the Minister of Trade, Industry and Energy, Minister of Employment, head of the Office for Government Policy Coordination, chair of the Financial Services Commission, and the chief economic advisor. From this month, heads of relevant institutions and private experts will also be included based on the agenda items. This is a measure aimed at enhancing the effectiveness of industry-specific policy execution.
The ICRM serves as a consulting body to oversee and coordinate short-term issues related to restructuring or discuss long-term plans to strengthen industrial competitiveness. Established in 2016, the ICRM did not convene for two years after discussing the acquisition of Daewoo Shipbuilding & Marine Engineering by Hanwha Group in December 2022, but it resumed on November 27 last year. Up to now, discussions have included measures to support the semiconductor ecosystem, petrochemical industry, and eco-friendly vehicles and secondary batteries.