South Korean lawmakers proposed a set of legislative bills on Tuesday (28 July) that would put an end to the nation’s controversial public support for coal-fired power projects beyond its borders. They cited plummeting clean energy costs in recipient nations, financial and reputational risks linked to coal ventures, and the urgent need to tackle the climate crisis.
The four draft bills seek to prohibit the East Asian country’s largest government-owned utility firm and financial institutions from funnelling taxpayers’ money into coal projects, realising a key tenet of the Green New Deal pledge made by President Moon Jae-in’s Democratic Party of Korea in the run-up to the parliamentary election in April.
More than spurring South Korea’s post-pandemic economic recovery, the sweeping policy package aims to foster sustainable growth and put the nation—the world’s seventh-largest greenhouse gas emitter—on a low-carbon development path. But since the ruling party’s landslide victory, the question just how far the Green New Deal should go has become a hot button issue, with its details still a battleground.
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The newly proposed legislation would see the exclusion of investments in coal power, without exceptions, by all public financiers and firms traditionally behind Korean-funded fossil fuel ventures. They include Korea Electric Power Company (Kepco), the Export-Import Bank of Korea, the Korea Development Bank, and Korea Trade Insurance Corporation.
While the government has the mandate to intervene in these companies’ financial decisions and business strategies, there has been no legislation in place that would oblige political leaders to ban them from pouring funds into coal ventures, according to Sejong Youn, director at Seoul-based climate policy group Solutions for Our Climate (SFOC).
If passed into law, the bills are set to worsen the funding squeeze for coal projects globally, as South Korea is among the world’s biggest public backers of the fossil fuel. The proposal comes a month after Japan tightened conditions for its support of coal overseas, pledging it would only fund power plants that use high-efficiency technology, and only if recipient countries commit to long-term decarbonisation goals.
Amid increasingly dire warnings of climate change, pressure is piling on companies and governments to back away from coal, which is the world’s dirtiest fossil fuel. Many global financial players have begun taking global warming seriously, if only to safeguard their bottom lines. The recent Banking on Climate Change 2020 report by environmental group Rainforest Action Network shows that 26 of 35 major global banks analysed have published policies restricting coal finance.
In a statement, Kim Sung-hwan, one of the assemblymen behind the new proposal, said: “Countries around the world are prioritising coal phase-outs in order to address the issue of climate change. If public financial institutions do not declare a coal phase-out, the National Assembly must ban such investments through…legislative amendment.”
Assemblyman Woo Won-shik, who proposed changes to the country’s Export-Import Bank Act, said “among OECD countries, Korea and Japan are the only countries to pour public finance into overseas coal projects, and Korea is being dubbed an international ‘climate villain’ for ignoring…efforts to fight climate change.”
He added: “Pushing forth a more consistent Green New Deal policy is the only way to stop overseas coal investments and for Korea to shed this ‘climate villain’ label.”
On the likelihood of South Korea’s National Assembly passing the proposed bills, SFOC’s Youn said: “It is currently unclear whether the bills will be passed into law. But [the phase-out of overseas coal finance] was part of the Green New Deal pledge. The fact that lawmakers have followed up with this proposal shows that the initiative is there.” It is not yet known when legislators will vote on the matter.
The proposal follows Kepco’s announcement that it would back the 2,000-megawatt (MW) Jawa 9 & 10 coal-fired power project near the Indonesian capital Jakarta, despite warnings the venture could incur significant losses for investors. As well as receiving heavy public criticism, the utility firm’s decision has been intensely debated in government circles, Youn told Eco-Business.
While closing the door on all new coal projects, the new laws would have no retroactive effect, he said. This means deals that companies or banks have already committed to cannot be declared void, and the Jawa project, which has been given the go-ahead by Kepco’s board of directors, will likely proceed if the firm has managed to finalise all financial contracts.
Things may turn out differently for the 1200-MW Vung Ang 2 coal power plant in Ha Tinh province, Vietnam, which Kepco is also involved in. The project has yet to be greenlighted, and if the new legislation is approved before Kepco can seal the deal, the firm will need to back away from the venture.
But with the pre-feasibility study completed and Kepco aggressively trying to push the deal through, that window of opportunity is closing fast. “If legislation is going to have a meaningful impact, the [National Assembly] had better pass the bills sooner rather than later,” said Youn.