Korea urged to develop action plans for net-zero transition

McKinsey & Company partner Choi Seung-hyuk gives a lecture on "net-zero transition" during the first of two sessions at the 2022 Korea Times Forum at the Korea Chamber of Commerce and Industry (KCCI) building in Seoul, Tuesday. Korea Times photo by Shim Hyun-chul

'Korean government, firms should work faster on climate goals as latecomers'

By Yi Whan-woo

Korean businesses should perceive the global challenge to achieve net-zero greenhouse gas emissions as an opportunity to nurture new growth engines, although the transition to fulfill such goals can be costly and demanding, according to a McKinsey & Company partner who advises on advanced industries in Korea.

Speaking at the 2022 Korea Times Forum at the Korea Chamber of Commerce and Industry (KCCI) building in Seoul, Tuesday, Choi Seung-hyuk from McKinsey & Company's Seoul office said the Korean government should come up with more support for domestic corporations to better cope as latecomers with the global race to achieve net-zero emissions.

Choi's comments came as McKinsey & Company, a multinational management consulting firm, assesses that a consensus to reach net-zero has been built in the Korean business community but it still needs to work faster to carry out related missions.

Korea accounts for 2 percent of the carbon emissions worldwide and is ranked ninth on the list of the world's top emitters.

Korea releases 16 tons of carbon emissions per person, which is higher than the world average of 7 tons and the emissions of larger economies, such as Japan with 10 tons and China with 9 tons.

"Making efforts for net-zero should not be perceived as a burdensome homework, but rather as a chance to aggressively uncover new growth engines," he said during the first of two sessions at the forum aimed at discussing policy suggestions to the nascent Yoon Suk-yeol government.

Choi's session centered on the topic of net-zero transition and explained that investment opportunities worth $5 trillion are expected to be created in the global market by 2030.

Although used interchangeably, net-zero is a broader term compared to carbon neutrality and therefore is regarded as being harder to achieve.

The former refers to no carbon emissions derived from a product or service, so it is not necessary to capture or offset the carbon, while the latter refers to removing as much carbon being emitted and achieving a balance between carbon emissions and carbon absorption from the atmosphere.

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The United Nations is pushing to reach net-zero by 2050.

Accordingly, net-zero related markets are emerging in various areas. They range from de-carbonization in electric power to low-carbon mobility, circular products and packaging that are durable, easy to reuse or recycle, low-carbon farming and agricultural products, energy-efficient buildings, hydrogen energy, bioenergy, de-carbonization in manufacturing as well as carbon capture, utilization and storage technologies that can be applied to industrial processes.

Many global companies, with support from their respective countries, are developing what Choi called "bold goals and pledges" in cutting and reducing carbon emissions significantly.

"The business atmosphere in Korea of course has changed a lot, with more companies taking toughened climate goals as something that directly concerns their operations," he said. "They still need more commitment to 'bet everything they have' and that actions need to be taken at the entire corporate level and not at the individual level of smaller units."

He added that the companies should be willing to wholly transform themselves, instead of trying to maintain the current system on their path to reach net-zero goals.

In particular, small- and medium-sized enterprises (SMEs) struggle to achieve net-zero, as they lack capital, human resources and other essential elements.

Taking these obstacles into account, Choi said business transformation should be actively backed by the government, with measures to speed up implementing and supplementing policies on carbon tax and renewable energy, among others.

"By doing so, Korea and its businesses can hopefully lead in net-zero-related standards on international stage although they made a relatively late start," Choi said.

He stressed that the next 10 years will be "virtually the last chance given" to reach net-zero by 2050 in line with the U.N. climate goal.

The goal requires $9.2 trillion in average annual spending, $3.5 trillion more than today.

Noteworthy net-zero measures worldwide include the implementation of carbon taxes in 28 countries, including Canada, the European Union (EU), Japan and the United Kingdom.

In the EU, a short-distance flight connecting France and Austria was suspended in 2021 and sales of combustion engine cars will be banned from 2035.

The U.S. seeks to supply 100-percent carbon-free electricity from 2030, introduce 100-percent pollution-free cars from 2035 and make all buildings net-zero from 2045.

Japan became the first country in Asia to adopt a carbon tax policy in 2012 and Singapore was the first ASEAN member to introduce such a policy in 2019.

By industry, oil refineries are geared toward "redefining business fundamentals and shifting their business portfolios," according to Choi.

Automakers are cooperating with related businesses, such as steel mills, to create a supply chain oriented toward net-zero goals.