Energy and Climate Policy Institute

작성일 : 15-04-01 15:59
Enerzine 39 perspective on 3 energy and climate issues
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Energy and Climate Policy Institute for Just Transition (ECPI) has been prospected in 10 energy and climate issues. In this 39th edition of Enerzine, ECPI selected 3 issues that will be shared with the activists in the other countries. The three issues are:

1.Enforcement and Prospect of Emissions Trading System
2.Overseas Resource Diplomacy Scandal
3.Possibility of Energy Partnership between South Korea and North Korea

1.Enforcement and Prospect of Emissions Trading System

The Emission Trading System was launched in Korea in January 12, 2015. The first planning term will be from 2015 to 2017, while the second planning term will be from 2018 to 2020. Furthermore, there will be a standard price of 10,000 KRW per KAU Korean Allowance Unit, a restraint of trade range ±10% of the standard price, and a penalty of 30,000 KRW per KAU. The carbon market was not active due to not only the lack of awareness of the companies involved and companies thought the quota was very small. As a result, there were enterprises that would rather buy than sell.

Carbon Market Stability

According to KRX Korea Exchange, there are only 4 days to complete the carbon trading deal 2 months after the carbon market has been opened. The total trading volume was only 1,380 KAU and the total price was 11,550,000 KRW. The Korean government, as well as some experts, explained that it was an expected reaction of the market because they focused on the market’s stabilization rather than its vitalization. Another issue is that very few high ranking companies possessed emission credits. The emission share of the 50 high ranking companies was approximately 85% in 2013. They can carry forward their emission credits to next year, and this is the reason why they evade selling the credits from the beginning.

The explanation regarding the early stage of the carbon market seemed reasonable at one point; however, there is no need to elaborate the current circumstances. Nevertheless, if we take into consideration the aspect of conflict and cooperation among the companies, government ministries, and civil societies, and recall the debate on ‘market failure’, then we may need to analyze the situation before taking any action on the Korean ETS.

Serious Debate on the Allocation of Emission Credits

Another issue on ETS is the ‘Politics of Allocation or Quota’. Recently, the nonferrous metal industry, petrochemical industry, steel industry, and an economic organization have actively challenged the government. 525 companies, including three public financial institutions, have been subjected to the allocation of the ETS and have raised their objection. In order to address this situation, the Ministry of Environment decided to allocate an additional 6,700 thousand ton of quota. Finally, the total emission quota has been increased from 1,598 million ton to 1,647 million ton from 2015 to 2017. This is applicable to the official adjustment process. However, there was also concern regarding politics of conflict. In early January, 17 of the nonferrous metal companies filed an administrative litigation that insufficiently allocated approximately 26% of the emission quota. They appealed that there have been errors during the process on estimating the emission volume and calculating the allocation because there had been a miscalculation regarding the data that the government had used. The petrochemical industry in Ulsan City also filed an administrative litigation, and they have announced that the issue will be brought up soon. The petrochemical industry was dissatisfied with the reduction rate of 15.4%, which was higher than the average reduction rate of 5% from another industry, such as the steel industry and the power generation industry. The Ministry of Environment announced that they will actively respond to an administrative litigation. However, the ‘Politics of Allocation’ between the Ministry of Environment and the companies, as well as among the government ministries (Ministry of Environment and Ministry of Trade, Industry and Energy) are most likely progressing. And it reuse new issues are expected, such as ‘Politics of Dealing’ and ‘Politics of Measurement and Verification’.

Direction of the Politics of Climate Justice

The ‘Politics of Climate Justice’ has appeared in the carbon market, such as the ETS, with focus on the political economy of climate change. ETS is the political issue on national climate justice. Many stakeholders that have already been mentioned above, as well as the NGOs, such as environmental groups, civic groups, social groups, labour groups, and farmer groups, will participate at the venue of the debate.

The prospect of efficiency regarding the ETS is different because a controversy surrounding the acceptance of ETS occurred in each industry. Civil society is similar. Even though all NGOs respond to climate change actively, there are two different opinions on ETS. One would insist the improvement of ETS, while the other would require an alternative system not the ETS. These kinds of conflicts will exist not only during the early stages of the carbon market, but also after the market has stabilized. Moreover, debate on the role and function of ETS will continue. In particular, the EU-ETS and the decisions regarding COP21 will affect the national policy.

Written by Jung-pil, Lee (Researcher:

2.Overseas Resource Diplomacy Scandal

Curse of Resource Diplomacy

Overseas resources development, resource diplomacy, and energy cooperation diplomacy started during the Park Chung-hee government, remained stable during the Roh Moo-hyun government, and performed extremely well during the Lee Myung-bak government, until it was subjected to an investigation in relation to the government for the truth commission on overseas resources development. This scandal was not only a failure of one government, but also a weak point of the Korean energy system, which was largely dependent on foreign countries. As a result, this scandal will require a broader explanation.

The Lee Myung-bak government set up a very impractical and highly independent development rate for show, and started omnidirectional resource diplomacy. As a result, the curse of the resource diplomacy included inflated project outcomes that were taken by influential people of the government, inflated feasibility project of energy and resource public enterprises, appointment by orders from the top, corruption and moral hazard, deterioration of financial soundness, a sharp growth of debt, and selling at a giveaway price. These situations could be assumed the opposite of the resource curse, which insinuated countries that have an abundance of resources, but demonstrated low-level economic development and unstable democracy. Moreover, it came out into the open that violated the international development cooperation principle because the Lee Myung-bak government was connected to a resource diplomacy with an official development assistance.

When the Park Geun-hye government took over after the Lee Myung-bak government, the Ministry of Trade, Industry, and Energy, as well as scholars from the international studies associations, had chosen Korea National Oil Corporation’s buyout of Harvest Operations in Canada, the Korea Gas Corporation’s natural gas project with West Cut Bank (Canada), Korea Mineral Resources Corporation’s Ambatovy nickel project, and Madagascar as typical failure cases in overseas resource development businesses. Overseas resource diplomacy not only caused problems concerning energy resource and economics, but they also lead to environmental destruction, human rights abuse, labor repression, and conflict with indigenous peoples.

A complex body surrounded with overseas energy development and resource diplomacy is made up of various stakeholders, such as energy trade (public/private) companies, overseas resources development institutions, governmental ministries, Korea export-import bank and financial investment businesses, and national and international consulting groups, among others. Therefore, we should see this complex body in a complete condition with an organized substructure of ideology and strong material resources as the other complex bodies, cartels, or mafias. For this reason, it is imperative that we now start discussions on more fundamental solutions for the transition of energy path from the existing system, which is heavily dependent on overseas resources.

Written by Jung-pil, Lee (Researcher:

3.Possibility of Energy Partnership between South Korea and North Korea

The Condition of the Energy in North Korea

Even though North Korea’s economic indicators, such as the food issue, have been improved lately, the energy situation is still an ongoing problem. Power production is a direct example of the same problem in the early 1990s. In order to address this situation, the Government of North Korea accelerated the development and supply of ‘natural energie’ except for the existing hydropower and coal power generations. In 2013, the amount of power generation in North Korea was 22.1 billion kWh. It was approximately 4.5% of South Korea’s power generation. The level of power generation has remained similar to that of the early 1990s when the energy crisis started, which was caused by the dissolution of the Soviet Union, as well as droughts and floods.

The fuel rationing system has given the residential sector an opportunity to solve their energy crisis by buying from the market or supplying themselves. Energy consumption in the residential sector of North Korea was estimated to be 0.291 TOE per household. The main resource of energy for the residential sector is coal (especially for briquette). A shortfall of energy consumption in the residential sector was estimated to be 3,505 thousand TOE in 2011. In addition, the energy consumption in the residential sector of North Korea in 2011 was only 7.9% of the energy consumption in the residential sector of South Korea during the same period.

In order to address this situation, North Korea enacted the ‘Renewable Energie law’ in 2013. The ‘Renewable Energie law’ included the definition of renewable energy and purpose of law, basic principle of investigating, developing, and using renewable energy, renewable energy developing plan and encouragement, and reinforcement of basic structure for renewable energy techniques. This law defined renewable energy (solar, wind, geothermal, biomass, and marine energy) is not affect to the environment.

Possibility of Energy Partnership between South Korea and North Korea

In 2015, there are various events to commemorate or celebrate the historical event in the Korean peninsula, such as the 70 years of independence, 65 years from the Korean War, and 15 years from 6.15 Joint Agreements. During this process, we need to pay attention toward energy as an important issue for a peaceful regime on the Korean peninsula. As a global agenda, which is beyond the diplomatic aspect, in order to eradicate poverty, achieve a sustainable development, and solve the serious energy poverty issue in North Korea, we need to think about the energy partnership between South Korea and North Korea in order to build a sustainable energy system in the Korean peninsula.

For the time being, however, the energy partnership between South Korea and North Korea seems to take quite a long time to progress. This is due to the fact that South Korea and North Korea have different viewpoints. North Korea is interested in the development and support of renewable energy, which is very effective immediately and directly, and can also help solve the current energy crisis. South Korea, on the other hand, is interested in renewable energy as a tool for generating more profits for private companies via infrastructural development.

Written by Kang-jun, Lee (Researcher:

For many years, ECPI has tried to seek a better way to solve the energy poverty, and support the renewable energy system in North Korea in the private sector. In addition, ECPI is always waiting overseas researchers, institutes, and foundations to conduct research together.


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