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Political Framing of Green Growth – The Korean Approach
Presented at The Global Green Growth 2010 Conference held in Copenhagen on November 7 at New Carlsberg Glyptotek, organized by the Climate Consortium Denmark
Distinguished Participants:
I am much honored to be invited to address the theme of political framing of green growth at this conference. By way of doing so, I would like to explain to you how the government of the Republic of Korea has set out to launch its economy on the green growth path.
I would like to first inform you that, over last two years or so, there have been many developments which may be summed up by the umbrella concept of ‘low carbon green growth’.
Green investment has rapidly emerged as the most important business priority for big businesses.
By green investment here, I am referring to investment in renewable and clean energies like the photovoltaic, wind, CTL, GTL, the next-generation electric equipment such As LED and rechargeable batteries, fuel cell, and green cars like hybrid and electric vehicles.
It also includes investment in energy-intensive industries such as power generation, steel, and so on, for energy-saving and GHG reduction, and in other green businesses such as RDF and advanced water treatment.
All major business groups have identified green investment as their new strategic focus for the next ten to fifteen years.
Small and medium enterprises, or SMEs, too, have begun to participate in green businesses, working by themselves or in partnership with big businesses. Green businesses are emerging as a new growth engine for SMEs.
Korea Electric Power Corporation (KEPCO) is constructing the world’s most advanced and largest smart grid test bed on the Jeju Island. This project involves 12 consortia in which 168 enterprises participate. The plan is to complete the world’s first-ever nation-wide smart grid in Korea by 2030.
Local governments at all levels are engaged in a green race against one another.
Introduction of LNG buses for mass transportation, deployment of hybrid and electric cars, replacing all public lightings with LED, imposing renewable energy standards on public buildings, promotion of the use of wood pellet boilers, promotion of green shops, building ‘urban forests’, and the likes are on the green growth agenda for local governments.
The central government’s list of green projects is very long. Construction of a national bicycling track is one of them. I will have more details on the central government’s initiative. But for now, I would like to mention just two with profound consequences.
One is the project to construct a high-speed-rail network. This project is being driven by the need to cut down greenhouse gas emissions from transportation.
Its objective is to create replace the existing rail network with all high-speed-rail network that reaches essentially all corners of the country so that there will be a major modal shift of passengers and cargos from the road to the railroad throughout the country. The objective of this project is to cut down emission from the transportation sector which has been leading the growth of Korea’s GHG emissions.
Another national project of a huge significance is a project for adaptation to climate change. It proposes to enhance the national river system, and for the years till 2012, specifically to ‘restore’ four major rivers that run through the country and into the seas, in order to increase the water-holding capacity of the rivers. The primary objective is to increase the water-holding capacity of the rivers as well as be better prepared to cope with flooding in adaptation to climate change.
By now it should be clear that green growth has begun to take roots in the soil of the Korean economy.
All this began with the declaration of ‘low carbon green growth’ as Korea’s new development vision by President Lee Myung-bak in August, 2008, his first year in office, in his speech marking the anniversary of national independence.
President Lee said, “Green growth means achieving sustainable growth by reducing greenhouse gas emission and environmental pollution”. He further said, “It is also a new national development paradigm that creates new growth engines and jobs with green technology and clear energy.”
Korea’s green growth policies have been shaping up rapidly since President Lee’s declaration of the green growth development vision.
The government has been creating and elaborating the institutional framework necessary for the implementation of the new development strategy.
Among other things, the Presidential Committee on Green Growth was created. Consisting of 14 Ministers and 36 leading private experts, this committee is the highest body for public-private sector consultation as well as inter-Ministerial coordination on green growth policies. I currently have the honor of co-chairing it with the Prime Minister in my capacity as its civilian Chairman.
The Presidential Committee has organized a number of specialized private sector consultative bodies on green growth, such as those of scientists, IT enterprises, financial institutions, and consumer organizations. Also, local green growth councils have been created.
The Presidential Committee is the driver of the green growth agenda in Korea.
The committee prepared the National Green Growth Strategy for the period to 2050 as well as a Five-Year Plan for its implementation for the period, 2009-2013. This planning approach to green growth is meant to enable the government to fix the market failures associated with environmental degradation and climate change in a coordinated manner with maximum speed and effectiveness. The planning here is indicative planning in the sense of indicating the direction and scope of the government intervention in the market.
It is significant that the National Assembly passed the Framework Act on Low Carbon Green Growth at the end of last year. The Act authorizes the government to intervene in the market in any way that is justified by market failures, that is, with regulations, taxes and incentives. The law received a broad bipartisan support. This means that Korea’s green growth policies will survive changes of government in the years to come. This fact enhances the confidence of the market in Korea’s pursuit of green growth.
The Green Growth Strategy proposes the vision of a world class green and strong economy as the ultimate objective of green growth. The Strategy consists of three specific strategies for the realization of this vision – first, climate change mitigation and adaptation, second, creation of new growth engines, and third, achievement of the quality of life and the international leadership.
These three strategies lead to the identification of ten policy agendas as follows:
Climate change mitigation and adaptation:
1) efficient reduction of greenhouse gases
2) enhancement of energy independence
3) adaption to climate change
Creation of new growth engines:
4) development and deployment of green technologies;
5) greening of industries and promotion of green industries;
6) advancement of the industrial structure;
7) securing the foundation for a green economy.
Enhancement of the quality of life and international leadership
greening the land, the ecological space and the transportation system
9) bringing green revolution into our daily lives
10) becoming an international green growth role model.
The scope of the three strategies and those ten policy agendas shows that Korea is taking a comprehensive approach to green growth in order to transform its economy’s entire system of resources and energy utilization across the whole range of sectors from power generation to industries, agriculture, forestry, land use, houses and buildings, transportation, life style, and so on.
It is hoped that the comprehensive approach to the required structural transformation of the economy will maximize synergistic interactions between the supply side and the demand side of the markets, as well as give the market clear signals on, and confidence in, the forthcoming structural changes.
The consequent broad, inter-linked and continued changes across the economy will hopefully generate sustained green growth over time.
The key to sustained green growth will be a pervasive and sustained process of innovation, in both the technological sense and the institutional sense. The role of this innovation would be to delink economic growth and environmental degradation, most crucially by innovating and de-carbonizing the entire energy system, creating new growth engines in the process.
The Korean government is now introducing various specific policies to pursue those strategies and policy goals. To mention some of them, especially those with special bearing on this energy-system innovation, they are: <Slides in the background>
- Set up the national GHG mitigation target,
- Implement this target by, e.g., introducing energy/GHG target management system, mandating the installation of high-efficiency appliances, and introducing RPS,
- Develop and deploy green technology products (LED, green cars, etc..),
- Encourage R&D in green technologies,
- Promote greening of IT and greening by IT,
- Invest in green tech manpower,
- Green 9 major industries such as steel and petrochemical,
- Help to forge green partnership between big and small enterprises,
- Introduce GHG emission trading
- Introduce energy efficiency standards and emission standards
- Develop green financing mechanisms and market
- Introduce environmental taxes
- Promote green buildings, green homes, green cities, and green transportation
- Promote green consumption: carbon labeling, carbon points, carbon cash back, etc.
The most critical driver of green growth innovation is the pursuit of the implementation of the greenhouse gas emission reduction target. Korea is now focusing on this target.
The pursuit of this target has been triggering and accelerating innovation. Many of the green growth phenomena that are now observed in Korea have been directly or indirectly driven by the need to cut down the emission. For example, the proposal of the HSR network which I mentioned earlier had been prepared as the main pillar of the vision of a ‘green transportation system’ which was conceived to help Korea cut down its rather large GHG emission.
In November last year, Korea adopted the medium target of reducing its greenhouse gas emission by 30% relative to BAU by 2020. This was the maximum of the range that was recommended for the developing countries by EU.
This was considered a highly challenging target for Korea with its highly fossil-fuel-intensive industrial structure and had been opposed by the business community. In the end, it was adopted on the ground that, if they would try hard enough, Korean industries can meet the challenge and that, in so doing, they would generate a lot of innovation and bring about a strong green growth effect.
For the purpose of the debate at that time, the Presidential Committee had prepared a list of illustrative examples of green energy technologies that would have to be developed for the purpose of enabling Korea to meet the emission reduction target under each of the three alternative targets or scenarios.
For example, scenario 1, the -21% scenario, the weakest of the three, would require removal of energy inefficiencies and deployment of green homes, green buildings, high-efficiency lighting equipment like LED, reform of the transportation system, new and renewable energies, and so on.
Scenario 2, the -27% scenario, would require all those for scenario 1 and further, more innovative and more costly solutions such as removal of F GHG gases, deployment of hybrid cars, increased use of bio fuels, and partial deployment of CCS.
Section 3, the -30% scenario, would require all those for scenarios 1 and 2, and further require a rather expansive deployment of more advanced green cars like to electric vehicle and fuel cell cars, as well as of most advanced high-efficiency appliances and products, and a wider deployment of CCS.
I personally argued that the strength of the emission reduction target we adopt would determine the scope of the clean energy innovation that the economy needs and would deliver. I further argued that, from this perspective, nothing less than scenario 3 would be strong enough to enable Korea to catch up with more advanced green developed countries in terms of both green economy and economic prosperity.
After grueling several months of nationwide debate that was administered by the Presidential Committee, President Lee Myung-bak chose the most ambitious target of the three.
It may be noted that President made a political commitment to this target in Copenhagen last year, declaring that Korea would pursue it unilaterally and voluntary in what he called a “Me-First Approach”.
This approach allows Korea to make an early start toward green growth. I think that this approach enhances the confidence of the market in Korea’s green growth policies.
The Presidential Committee is now overseeing the preparation of the implementing measures for the emission reduction target.
We are preparing to introduce the system of assigning and managing energy and GHG emission reduction targets for major polluting firms and institutions.
We are also preparing to introduce an emission rights trading system for its pilot implementation in 2013.
We are preparing to introduce what we call the ‘green credit system’ by which big businesses will get credit for the emission reduction they have helped energy-intensive SMEs achieve.
We are preparing to reform the energy price system which currently subsidizes the industry, farming and transportation.
The government has identified ten ‘core’ green technologies in view of their potential for Korea’s early development and deployment as well as their potential to contribute to GHG reduction. The government is making a preferential allocation of R&D support budget to those ten technologies.
The government is also encouraging investment in the R&D of new and renewable green technologies.
The government is intent on the creation of the initial domestic market for new and renewable energies.
The SMEs play a critical role in innovation and as suppliers of critical parts and components to big businesses. At the same time, they are handicapped by the underdevelopment of the financial and capital markets for them.
Probably, the most serious challenge in seeking green technology innovation is the uncertainties and risks associated with the R&D and commercialization. The market tends to under-finance those efforts. The externalities associated with green technology will worsen the problem of under-financing by the market. The SMEs are especially handicapped by these problems.
Korea is making efforts to cope with those problems by building an effective green finance system.
The most challenging problem encountered by entrepreneurs, especially green venture firms, which are interested in green innovation is that of financing. The financial institutions and the capital market have difficulty in supplying fund those firms in part because they are not familiar with green products and technologies or with those firms who invest in those products and technologies.
In order to help and encourage financial institutions and the capital market overcome this problem, the government has introduced a ‘green certification system’. The hope is that such green certification will enable and encourage financial institutions and the capital market to invest in the green technologies, green businesses and green enterprises.
Now, by way of concluding, I would like to summarize the key points of my presentation thus far and note their implications for international cooperation.
I began by presenting a birds’-eye-view of various green growth developments which are currently observed in Korea.
I have then introduced Korea’s long-term vision and strategy for green growth development as well as the comprehensive government-led effort to transform the entire system of resource and energy in order to realize the vision and launch a process of sustained green growth.
Various green growth developments which are now observed in Korea should be explained as the response of the market to those policy developments. So, so far, Korea’s green growth model newly introduced seems to be working well.
The key to sustained green growth is in the sustained process of innovation to de-carbonize the entire energy system. I have argued that the ultimate driver is the national commitment to the reduction of greenhouse gas emission and that Korea’s ambitious emission reduction target will help accelerate green innovation.
Continuing and credible efforts to implement this target will be crucial in sustaining this process. A number of tools being introduced for this purpose were introduced. It will be no small challenge to design and deploy these tools successfully and effectively.
I have shown that the government plays a critical role in expediting and sustaining the innovation process with regulatory and supportive measures, especially in regard to R&D, market creation, and green financing. I have also shown that in Korea the focus of government invention is on the enabling the SMEs to overcome their inherent handicaps.
I would like to note that the government’s intervention in the market in Korea is broadly of the market-enhancing nature and is addressed to market imperfections.
There is always the risk that the government may overdo in this or make other mistakes. But the Korean government is expected to overcome this risk because it is operating a rather dense network of dialogue between the government and the private sector, providing for quick feedbacks from the market and a flexible adjustment mechanism.
The comprehensive transformational approach, the stability and transparency of the institutional framework, and the power of the inspiring vision of low carbon green growth, reinforced by the Me-First approach, will hopefully sustain Korean economy’s green growth.
What Korea’s green growth policy regime needs for success by way of augmentation is an open international environment for trade and investment cooperation in green goods and services, and a greater willingness on the part of Korea to make a good and active use of such environment, as well as an increasing network of the like-minded pursuers of low carbon green growth.
The Korean government launched an international think tank called the Global Green Growth Institute, or GGGI, on June 16 this year, in order to create such network of the like-minded green growth countries. GGGI will provide advisory and consultancy services for the benefit of the developing countries committed to green growth.
Thank you for your kind attention
Nov.72C2010_Political_Framingof_GreenGrowth.docx