Oct. 26. 2007
Dr. Kyung Hwan Toh
Director of Energy & Resources Policy Division
Ministry of Commerce, Industry & Energy
Republic of Korea

Table of Contents

I. Trends of Climate Change
II. Overview of Korea’s efforts
III. Government’s New Strategy
IV. Industry’s Strategy against Climate Change

I. Trends of Climate Change

1. Rising Concerns over Climate Change
Exponential growth ofFossil Fuel Use

Global Warming

Unusual Weather Patterns
Gas:
Gas: 3.3
3.3 times
times

Globally 1.6 times

Fossil fuel use increases dramatically

Oil:
Oil: 1.5
1.5 times
timesCoal:
Coal: 1.1times
1.1times

Increased 1.6 times in last 40 years
2006

1965

1.5℃ increase
0.74℃ increase

Visible occurrences of global warming
Average temperature of earth’s surface
Increased during the last 100 years

1906

2005

<world><world>

1906

2005

<Republic<Republic ofof Korea>
Korea>In the absence of additional efforts
Estimated rise in temperature up to6.4℃ by 2100
(3℃increase: 15 million people
would face threats of major flood)

Economic cost : 5~20% of GDP(Preventive measures could bringthis figure down to 1%)1< Consequences of Climate Change >Diminishing Water – Change of the Aral Sea

19271949

2006

22. International Discussions on Climate Change(’92.6)(’97.12)

Sets legally binding targets fordeveloped countries
Average of 5.2% reductions against a baseyear of 1990
Korea accepts Kyoto Protocol(’02.10)

Adopted at UN conference on
Environment and Development
in RioKorea accepts UNFCCC(’93.12)(’05.2)(’01.3)(’05.11)(’06.1)3

3. Latest Developments
1. Emerging as major international Agenda for 2007
UN Security Council meeting, Davos Forum, G8+5 Summit
UN High level meeting(’07.9), UN Climate Change Conference (’07.12) for Post Kyoto talks

2. New proposals from Bush Administration ('07.9)
Hosted meeting of the 17 biggest emitters of greenhouse gases

Proposes to establish long term targets by 2050

3. International Environment Regulation and strong growth of New Market
Non-tariff trade barriers forsemiconductor and automobile exports

Growth of Carbon Market

Unit : Billion$150

10302005

2006

2010

4

II. Overview of Korea’s efforts

1. GHG Emissions in Korea(1)Total GHG Emissions
Total emissions in 2004 (591 million tCO2) accounts for 3.3% of totalemissions of Annex1 countries(17,927 million tCO2)
92.4% increase over 1990 Emissions
Energy and industry sectors are responsible for 94.7% of total emissions
Unit: million tCO2
EnergyPublic/Etc

Industrial Processes

AgricultureㆍWastes

452.8
452.8

528.6
528.6

590.6
590.6

2.1%

Household/Commercial

12.3%

310.6
310.6

Transportation
19.7%

Power
33.7%

83.0%

Industry
32.3%

79.8%
11.7%
5.3%

6.4%
12.8%

1990

1995

2000

2004
51. GHG Emissions inKorea(2)Difficulties of reducing emissions to 1990 level2004 Emissions : 90.2% increase over 1990 (310 million590 million)

Forecast of GHG emissions in Energy Sector in 2030 : 818 million ton, 231%
increase over 1990 emissions

Binding Targets for cutting developed
country emissions▲ 200%▲ 90%1990

EU(2050)

Japan(2050)▲▲

Kyoto Targets('08-'12)

Emissions are still growing (Korea)

-50%

▲

-5.2%

Current-50%

20042030)

6

1. GHG Emissions inKorea(3)Energy Intensive Industry Structure

GDP

Portion of Energy Intensive
Manufacturing Portion in GDP
Industry (Manufacturing)
26.4

20.9

22.0

20.2

18.1JapanKOREA

USAJAPAN

14.9

EnergyConsumption

KOREA

USA

High Energy Efficiency
Energy Efficiency Index (Steel)

GHG
Emissions

120120CHINAUSA

100

99

JAPAN

KOREA

7

1. GHG Emissions inKorea(4)CO2 emissions relative to Energy Consumption
2.94

1.41

France

2.05

2.17

2.28

CanadaKorea

Japan

Portion of New & Renewable Energy
%

13.6

2.44

2.49

GermanyUSA

2.54

Denmark

High cost for promoting new & renewable energy
711
Unit Cost
Power(%)(KRW/Kwh)

5.9

4.2

3.8

3.2

40.0
2.26

Denmark France USA Germany Japan Korea
IEA 2006 (2004 data), Korea ( 2006 estimates)

China

38

Nuclear(2005)

1033936.4

Coal

16.1
LNG

1070Wind0
Photovoltaic

82. Domestic Measures for Addressing Climate Change(1)Overall
Coordination
External
Negotiations

EnergyIndustry

Environment
Measures

Agriculture
Forestry

R&D

9

2. Domestic Measures for Addressing Climate Change(2)’99-’01
Building Basic
Framework

Negotiation
Strategy
Reinforceinternational
Cooperation- APP, etc’02-’04’05-’07

Strengthening GHG
Reduction Measures

Building National Strategy
for full-fledged reduction

Promoting
NRE
Improving Energy
Efficiency
Launching Emission
Reductions RegistryCenterGHG Statistics
Management System- Emission DBby industry andcorporations

GHG Reduction
Technology DBImplementing
R&D Measures against
Climate Change- Focusing on 5 coreareas including
energy efficiency

10III.Government’s New National Strategy

1. Basic Directions
Transforming into Climate Friendly Economy Structure• Voluntary Reductions• Setting reduction targets• Utilizing newopportunities

and implementation Plans

Existing Reduction
Measures• Improving Energy Efficiency• Supplying Low Carbon Energy

Innovative Driving Forces for
GHG Reductions
Introducing partlymandatory policy• Pilot projects inPower Sector• Government-Industry
Agreement

Vitalizing Carbon Market• CDM• Incentive• Carbon Fund

Creating New Markets• Developing Low
Carbon Technology• New International
Technology Market

112. Core Agenda(1)Setting National Reduction Target
through analyzing potential reductions in each sector

Determining potential reductions in each sector

National Target
Energy Industry

Forest/Agriculture
Environment/Waste

MOCIE

MOAF

MOE

Reduction Targets
Considering potentials, cost, policy options in each sector
Continuously updating by reflecting new technology and policy changes
12

2. Core Agenda(2)Setting Phased National Reduction Targets

Analysis of Economic Cost EffectivenessPrioritizing Reduction Options through B-C Analysis
Estimating Marginal Cost and Total Cost Associated with Reductions

Marginal cost1000 KRW/tCO2

Biomass Mixed Fuel
Nuclear Forestry

Applying CCS toIndustry Sector

Photovoltaic

Standby Power

CoolingWind

GHG Reductions
GtCO2/yr
Hydrogen Fuel Cell

Lighting System
Improving fuel efficiency
Improving Insulation

13

2. Core Agenda(3)Building Low Carbon Energy Supply System

NRE Portion

Focusing on Hydrogen Fuel Cell, Photovoltaic, Wind

Allocated 3,200 billion won by 2011
Mandatory utilization in public organizations
Providing assistance to bio/waste

2006

Extending Tax Exemption (’08~’10)
Equivalent to 540 billion won (100% tax exemption)

2011

2030

Biodiesel Mix Ratio

Equivalent to 540 billion won (100% tax exemption)

Supplying Domestic Fuel(Increasing Rapeseed Production)

2006

Determine Appropriate level by 2030
Importance of nuclear power in relation toclimate change
Construction of additional nuclear power
plants (USA, Japan)

20

2012

Long term

28
Beingplanned

2006

2016

2030

14

2. Core Agenda(4)Reinforcing Energy Demand Management

Improving Energy Intensity
0.345(’06) → 0.20(’30)

Inducing Public Energy Saving
Developing global warming index
Implementing “No Driving” Campaigns

Disseminating High Efficiency
Appliances
Corporate Monitoring by Civic Organization
Mandatory Displaying of Warning Label for
products failing to meet Standby Power Standards

Strengthen average fuel mileage policy
for automobiles

Reporting Corporate Carbon Reduction Index
Promoting purchase of low carbon products

Arouse Corporate Social Responsibility (CSR)
Inducing production of environment friendlyproducts

15

2. Core Agenda(5)Industry Gradually Transformed into Low Carbon Structure
Energy Consumption per Value Added(TOE/million KRW)

ServiceManufacturing

Manufacturing
ManufacturingMetal
Metal Processing
Processing Petrochemical
Petrochemical

SteelSteel

Roadmap for Building Low Carbon Industry
Increasing the portion of service industry

2006

Manufacturing
Service

27.8%
57.2%

2030

23%

Manufacturing

66.3%

Service

Fostering Design, R&D, Marketing and Knowledge based Service Industry
Developing innovative manufacturing technology

Targeting World’s Highest Efficiency

16

3. Carbon Market(1)Introducing Partly Mandatory Policy & GHG Reduction Programs
Introducing Partly Mandatory Policy
Mandatory purchase of KCER for those failingto comply with RPA (Renewable portfolio
agreement with power plants, etc)

EnergySupplier

MOCIE

Strengthening Voluntary Agreement
Objective verification of reductions at VA installations
Adopting phased Negotiated Agreement

Non-binding
Non-binding Agreement
Agreement

Providing Government Incentives
Purchasing KCER
(5000won/KCER)
20072011

17

3. Carbon Market(2)Establishment of Carbon Market

RPA
Companies
Early Action byLocal Companies

Participants ofGHG Reductions

GHG Reductions

Government

Projects

Overseas
MarketSufficient Financing

Carbon Fund

Identifying
Identifying Potential
Potential
GHG
GHG Reduction
Reduction Projects
Projects

Providing
Providing
Consulting
Consulting ServiceService

Identifying Projects
through VA, Energy Audits

Procedures, Project
Design Documents

Fostering
Fostering Professional
Professional
Trading
Trading CorporationsCorporations

Establish Emission
Trading Agency

18

3. Carbon Market(3)Vitalizing Carbon Market :KCER Supplies

Securing Demand
1. Government
Allocate budget for 100% KCER
purchase’07(5billion won), ’08(9billion won)

2. Linking with Overseas Market
Exporting KCER to CCX, CDM Markets

3. Mandatory Utilizing of NRE
at Public Organization
Failing to achieve the initial objective

’07

’08

’09

’10

’11

Mandatory purchase of KCER

193. Carbon Market(4)Vitalizing Carbon Market :Trading Price
Fluctuating with EUA price shifts (Base price at 5,000won)
Designate EUA forward price with 2008 Dec delivery as index price (Agreement with ECX)< EUA vs. GHG Reductions>

20

VI.Industry’s Strategy Against Climate Change1. Climate Change Issues & Environmental Management

Challenging Task
for Corporate
Management

Additional Reduction Price

Pressures from
Civic Organizations

New Management System(Organization, Production,Sales, etc.)

Emphasis on Corporate
Social Responsibility

Davos Forum(’07. 2): The biggest obstacles
for management21

2. Risks Associated with Climate Change – Individual Sector

Power, Energy Intensive Industries :Mandatory GHG Reduction

Manufacturing :New Environment Regulation

Rising needs for
NRE, clean energy,energy efficiency

Automobiles

25% reduction for all EU
bound exports by 2008

Petrochemical
Petrochemical

Unit cost ▶ Decrease inincrease
production

Semiconductors

More than 10% PFC reductions(relative to 1997) by 2010

Steel

Already achieved
high energy efficiency▶ High marginal cost for reduction

CementHigh reduction cost due tooutdated installations & absenceof effective reduction technology

PowerNew Environment Regulations areexpected to be imposed on exports22

3. New Business Opportunities From Climate Change

Climate related productsManaging
Managing carbon
carbon fund,fund, developing
developing &&Investing
Investing carbon
carbon relatedrelated financial
financial products
products

New heating & cooling technology

Developing hybrid automobiles

Photovoltaic,
Photovoltaic, wind
wind power
power newnew technology
technology
Investing
Investing inin highhigh profit
profit yielding
yielding CDM
CDM projects
projects

Cool Biz industry
Providing
Providing consulting
consulting services
services onon
technology,
technology, financing,financing, emission
emission trading
trading

Developing IGCC, CCStechnology

New model ofrefrigerators, air conditioners

Climate Change : Threat opportunity (survey on major global corporation : CDP FT500)

Both opportunities and threats (87%)
Change in corporate profits : -25% ~+10.6%
23

4. Corporate Response(1)Change in Management Philosophy
Implementing voluntary corporate emission targets
Cost Effective Corporate Internal Emission Trading System
BP, Shell, SK Energy, LG Chemical, Power companies

Investing in reduction project and technology developments

Change in Corporate Structure

Climate Change
Task Force Team

Strategic Alliance
between sectors & Industry

Eco-friendly
process & production

Carbon Market
Managing Carbon Risk

Environment Friendly
Corporate Image24

5. Corporate Response(2)Carbon Neutral Program
KEMCO

Corporations

KEMCO

Corporations

Consulting
Reduction Options

GHG Reduction,Purchase VER

Verification,Certification

Corporate Image
Marketing

Applicable to offices, building, metropolitan, local government, events(entertainment, sport, exhibition etc)

Co-operate & Satisfy Demands of NGO and Public
Joint Development of Carbon Reduction Index with Civic Organization & Industry :Public Announcement of Best Corporations (annually)
Coping with Consumer Purchase Pattern: Low Carbon Products, Preference on
Products of Environment Friendly Corporations

25

Thank you !!