Fuelling South Korea’s transformation

In a series of posts leading up to the World Economic Forum’s Energy for Economic Growth report launched on Wednesday 7th March 2012, Han Seung-Soo, Former Prime Minister of South Korea, takes a closer look at the role energy has played in transforming South Korea into a high-tech industrialized economic power and describes the challenges of transforming into one of the world’s leading green-growth nations.

Energy empowers growth. The meteoric rise of the Korean economy since the 1960s has transformed the nation into a hightech industrialized economic power that sits among the trillion dollar club of world economies. Today Korea has cemented itself as one of the world’s 15 largest economies. Energy has been at the core of this development.

Korea’s growth has been propelled by the development of industries that are extremely energy-intensive, such as shipbuilding, automobiles, steel and petrochemicals. Unsurprisingly, the upward trajectory of the nation’s GDP growth has been matched by an equally steep rise in energy consumption. Korea’s total primary energy supply stood at 43.9 million tons of oil equivalent (toe) in 1980, a figure that increased more than fivefold to 243.3 million toe in 2009, making Korea the ninth largest energy consuming country in the world. Annual consumption per capita has also increased dramatically, from 1.1 toe in 1980 to 5.0 toe in 2008.

However, Korea’s indigenous energy resource is limited to a negligible supply of low-quality anthracite, making it highly dependent on foreign sources of energy. As of 2008, Korea ranked fifth, third and second among the world’s top importers of crude oil, coal and liquefied natural gas, respectively. In total, 96.4% of Korea’s energy is imported at a cost of US$ 91.2 billion, or 28% of total imports in 2008. Although energy has made an invaluable contribution to the economy, Korea’s dependency on imports, which are often subject to external shocks, means that energy independence remains an important challenge.

Unfortunately, Korea’s fossil-fuel oriented economic structure (84.2% of energy consumption was derived from fossil fuels in 2009) has also led to increasing concentrations of atmospheric greenhouse gases (GHG), which is a key contributor to global climate change. For a country that is particularly vulnerable to the effects of climate change, this reality generates some uneasiness.

In addition to energy and climate challenges, Korea is faced with a slowing economy that is highly exposed to global shocks and that has failed to generate adequate employment. Green growth was promulgated as Korea’s new national vision in 2008 in an effort to tackle these multifaceted challenges. Green growth is a new, revolutionary development paradigm based on the underlying principle that economic growth can be achieved in parallel with climatic and environmental sustainability objectives. It reorients the traditionally-held assumption that a dichotomy exists between the economy and the environment. Through innovative ideas and investments in new, advanced technologies, green growth transforms the climate, energy and financial crises into opportunities for renewed, sustainable growth.

Introduced in early 2009 to put the new national vision of low carbon green growth into policy action, the Green New Deal represents an amalgam of short-term fiscal stimulus with long-term strategies that will allocate roughly US$ 38.1 billion from 2009 to 2012 to engender green growth. Institutional and legal frameworks to coordinate and enforce green growth policies were established through the Presidential Committee on Green Growth and the Framework Act on Low Carbon Green Growth enacted by the Korean National Assembly, which dictated a 30% reduction in GHG emissions by 2030 relative to business-asusual levels. Under its First Five-Year Green Growth Plan (2009 to 2013), Korea is investing 2% of its GDP towards green growth-related R&D.

The promise of green growth is becoming evident in the energy sector. Seventeen new engines of growth have been identified. Chief among them are green technologies, including renewable and low-carbon energy, energy-saving technologies, smart grids, LED applications and more.

Though renewables currently supply only 2.5% of Korea’s primary energy, the target is to reach 11% by 2030. Bolstered by effective regulations and incentives, including feed-in-tariffs, renewable energy is making rapid strides, particularly in solar PV and wind. Energy generation from solar PV increased nearly 40 times and wind generation fivefold from 2005 to 2009. Fuel cells, which arose as an electricity source in 2005, had increased their generating capacity tenfold by 2009.

Private investment for renewable technologies was expected to reach US$ 3.6 billion in 2010. Furthermore, the number of manufacturing companies in renewables increased from 41 in 2004 to 146 in 2009, and the number of employees increased from 689 to 9,151 over the same period. Exports of  renewables increased from US$ 65 million in 2004 to US$ 2 billion in 2009, and solar PV and wind are expected to continue to play a key role. In a best case scenario, smart grid-related products will yield an annual increase of 50,000 jobs, US$ 67 billion increase in domestic demand and US$ 44.5 billion in exports by 2030.

As Korea continues its endeavour to become a leading green growth nation, the energy sector will remain a cornerstone of the economy. Importantly, the domestically produced, low-carbon, green energy engines that drive growth today will allow the nation to simultaneously enhance its energy independence and tackle climate change, enabling a more sustainable, greener future for Korea.

Author: Han Seung-soo is the former Prime Minister, South Korea

Pictured: Workers of Hyundai Heavy Industries, the world’s top shipbuilder, work beside a cargo ship under construction at a dockyard of Hyundai Heavy Industries in Ulsan, about 410 km (256 miles) southeast of Seoul, February 25, 2009. Signs that customers of South Korea’s shipbuilders will delay or cancel orders is providing an additional threat to the beleaguered won, already under fire from concerns over the country’s foreign currency liabilities. REUTERS/Jo Yong-Hak