South Korea.

Context and considerations for a Unions4Climate campaign

South Korea is an industrial giant - especially in heavy industry - and is very intensive
in energy consumption. Industrial growth came about despite the fact that the country
had not domestic sources of energy. The Korean industrial revolution was based on the
use of imported oil and coal, yet if Korea wants to keep its leading industrial position in
a low-carbon future, it must change its energy sources and clean up its energy mix.

Although the first efforts of the Korean government have focused on nuclear power, the
Fukushima disaster and also disclosures of Korean plant safety scandals could be
chance to reinforce renewable sources as an option. In a huge energy dependence
context it is difficult to explain why the Korean government has not taken the promotion
of renewables more seriously.

The Government announcements towards clean and green development contrast with
statistical analyses of outputs and trends. Emissions levels continue to soar with Korea
being the OECD country with the fastest growing rates. Correspondingly, the legitimacy
of environmental improvement as advocated by some Green Growth Strategy
investments is arguable to say the least. Despite this, South Korea’s climate plans, will
see the country double emissions by 2030 compared to 1990.

Transforming the Korean energy system presents a major challenge as the industrial
conglomerates, or Chaebol, continue to hold an enormous power. The democratization
of the economy has not advanced much in last years. The implications or this power for
the just launched emissions market have to be evaluated, as these conglomerates
which seem determined not to put "their interests" at risk.

Korean trade unions are being side-railed by a government which is committed to

reducing union power through steady labour deregulation. Nevertheless, trade unions
could play an important role by exerting pressure in key policy areas: investment in
renewables should be promoted nationwide and Korean unions could become more
involved in promoting and organizing workers in the relevant industries. Likewise,
campaigns promoting public transport and railways are important; however trade
unions working in these sectors have been struggling against intolerable government
pressure. With respect to energy efficiency, which is the touchstone of national
strategy, industry installations are a space where energy efficiency can be promoted
and monitored. In the workplaces where social dialogue exists, trade unions can draw
up energy saving campaigns with workers.

Emissions trends and national commitments

South Korea's emissions more than doubled between 1990 and 2010. This rise began
with a steep increase in emissions in the early 1990s. Growth then continued at a
slower pace until it started a downward trend in 1997. However, after this, and despite
large-scale spending on “green growth”, GHG emissions rose 18% over 2007-2011.1
This fact reveals the Korean government's green growth strategy has not been well
aligned from the beginning. Additionally, and notwithstanding the positive
communication campaign carried out by the government, the strategy's success is
arguable. According to Bloomberg New Energy Finance, South Korea is the fastest
growing emissions source among the OECD’s thirty-four nations2.

At the end of June, South Korea has put forward a target to reduce greenhouse gas
emissions by 37% below business-as-usual (BAU) by 2030. The target proposed in

1
Climate Action Tracker http://climateactiontracker.org/countries/southkorea.html
2
Bloomberg New Energy Finance, 2013 http://www.unep.org/pdf/GTR-UNEP-FS-BNEF2.pdf
 South Korea. Context and considerations for a Unions4Climate campaign

November 2009 and submitted to the Copenhagen Accord on 25 January 2010 was
reduce 30% below BAU by 2020.

In its 3rd National Communication (2012), South Korea lowered its BAU projections to
776 MtCO2e in 2020 from projections provided earlier of 813 MtCO2e. Under this BAU
projections the pledge would have resulted in emissions of 543 MtCO2e in 2020,
excluding LULUCF. Hence, Korea will need to cut 244 MtCO2e to reach its 30%
target3. In the INDC communicated this week, South Korea revised its 2020 business
as usual projection again slightly upwards which would weaken its 2020 pledge if this
were to be aligned4.

Fair share

Looking at climate change as an issue of global justice it is clear that South Korea's
contribution should be more ambitious. According to Eco-equity analyses, “given
a Strong 2C pathway target, the global mitigation requirement in 2020 is 19.8
gigatonnes.

South Korea's Copenhagen announcement felt short of this requirement, and the INDC
submitted in June, falls even shorter.

Complying with climate integrity is also in the self-interest of the country. Over the last
century, climate records show that South Korea’s average temperature has increased
by 1.5°C, this being more than twice as much as the global average of 0.7°C. Seoul’s
temperature alone has increased by 2.5°C, according to a 2011 study published by the
Nautilus Institute5.

The Korean economy: main challenges for reducing emissions

In almost all economies the energy mix is the key to reducing emissions, but perhaps
the energy mix could prove to be even more important in the case of South Korea.

The country is a big energy consumer; it was the world's ninth-largest energy consumer
in 20116. Electricity consumption has increased five times faster than the OECD
average in the past decade. This is due to the economic structure of the country, which
is very dependent on high energy consuming sectors such as industry, (manufacturing
and non-manufacturing), and transport7.

Historically, the manufacturing industry served as a growth engine and received

government support. Cheap energy and resource costs facilitated the manufacturing
industry's expansion, which, as a result, became resource-intensive.

Compared to OECD countries, the service sector in the Korean economy is

underdeveloped while the industry sector is oversized. Additionally, industries within
the high energy consumption sector, such as steel and petrochemical, represent a
higher share than in other countries. This highlights a paradox: even though energy
intensity is higher than the OECD average for the whole economy, some heavy sectors

3
Climate Action Tracker http://climateactiontracker.org/countries/southkorea.html
4
Climate Action Tracker http://climateactiontracker.org/countries/southkorea.html
5
Mazzeti 2012, Assessing South Korea’s National Strategy for Green Economic Growth http://uskoreainstitute.org/wp-
content/uploads/2013/10/Mazzetti_YB2011.pdf
6
IEA. Energy Policies of IEA Countries 2012. Review The Republic of Korea
https://www.iea.org/publications/freepublications/publication/Korea2012_free.pdf
7
OECD 2014. Economic Surveys. Overview Korea http://www.oecd.org/eco/surveys/Overview_Korea_2014.pdf
 South Korea. Context and considerations for a Unions4Climate campaign

have high energy efficiency when compared to OECD levels and for some sectors
emission reduction potential is lower than in Europe and the US8.

There are other industries, e.g. semiconductors, whose gains are rocketing and which
are aggravating climate change due to F-gas emissions. It is expected that F-gases will
increase from a 4.3 share of emissions in 2005 to 10.7% in 20209.

The government is decided to rely in its emissions trading scheme in order to achieve
the reduction objective. Full implementation of the ETS started in 2015 and covers all
installations in the industrial and power sectors which have annual emissions higher
than 25 ktCO2e. The cap aims to cut emissions by 236 MtCO2e, or 29%, by 2020 via
emissions reductions from the industrial sector (83 MtCO2e), the electricity sector (68.2
MtCO2e), the building sector (48 MtCO2e), and the transportation sector (36.8
MtCO2e)10.

Allowances will only be freely allocated to 100% of companies during the first phase
(2015-2017). However, companies in sectors that are considered energy-intensive and
trade-exposed (EITE), and as said this an incredible big share of Korean economy, will
receive 100% of their allowances free of cost during all phases. Business sectors are
considered EITE if they experience: (1) production cost increases over 5% and trade
intensity increases over 10%; (2) production cost increases over 30%, or (3) trade
intensity increases over 30%11.

Some unions and climate justice groups believe that the emission market in Korea will
not function due to the loose cap and too many exceptions, but becuase in itself is not
the proper solution to mitigate GHG.

8
Bloomberg 2013. South Korea Emissions Trading Scheme https://rfflibrary.wordpress.com/2013/05/16/south-koreas-
emissions-trading-scheme-white-paper/bnef.com/WhitePapers/download/318
9
The Republic of Korea 2011, Korea’s Third National Communication under the United Nations Framework Convention
on Climate Change http://unfccc.int/resource/docs/natc/kornc3.pdf
10
IETA 2014, South Korea The World’s Carbon Markets: A Case Study Guide to Emissions Trading
http://www.ieta.org/assets/EDFCaseStudyMarch2014/south%20korea%20ets%20case%20study%20march%202014.pdf
11
IETA 2014, South Korea The World’s Carbon Markets: A Case Study Guide to Emissions Trading
http://www.ieta.org/assets/EDFCaseStudyMarch2014/south%20korea%20ets%20case%20study%20march%202014.pdf
 South Korea. Context and considerations for a Unions4Climate campaign

The development of own energy sources

As previously noted, this industry was founded on low energy prices context. Due to
that, about 97% of its primary energy demand is dependent on foreign resources. In
2013, the country was the second-largest importer of liquefied natural gas (LNG), the
fourth-largest importer of coal, and the fifth-largest net importer of total petroleum and
other liquids12. Part of the coal and petroleum imported are used as raw material of the
steel and petrochemical industry.

The key to sustainability for Korean industry is in seeking out its own energy resources.
This together with the need for progress on low carbon development means a
significant change in the energy mix is needed.

12
US Energy Information Administration 2014 http://www.eia.gov/beta/international/analysis.cfm?iso=KOR
 South Korea. Context and considerations for a Unions4Climate campaign

With meeting these objectives in mind the Korean government began developing a
plan for low carbon development which focused on increasing nuclear power. However,
these plans were first setback by the consequences of the Fukushima disaster. A
second blow was given to them in 2012 when 2 nuclear reactors were suspended after
it was discovered that parts were supplied with fake certificates. However, it appears
nuclear power continues to be the Korean government's preferred energy source for
the future.

Furthermore, the government's push for renewable energies began late and has
suffered legislative changes. It could have also been - and still could be - far more
ambitious. Different actors have highlighted that the large capital investment devoted to
the Four River Project Initiative could have been better used growing a renewable
energy industry. This type of investments could have generated more jobs, reduced
emissions further, and given better environmental outputs.

The Renewable Portfolio Standard (RPS) was introduced in 2012 and is replacing a
previous feed-in tariff scheme. The new standard obliges suppliers to meet annual
generation targets on renewable energy. They start out at 2% and this steadily
increases to 10% in 202213.

The Korean government plans to invest $8.2 billion into offshore wind farms to reach a
wind capacity of 2.5 GW by 2019, from only 0.4 GW in 2012. Solar and tidal projects
are also being promoted. However, considering the potential impact and the need for
deploying national energy sources, these ventures are receiving less backing than they
deserve14.

Energy efficiency and transportation shift

Together with the energy shift, South Korea will need other policies. An example is the
transportation shift. Korea ranks 6th among OECD countries in highway and national
roads km/per capita. Railroad length has been stable since the Korean War cease fire.
Out of the total governmental investment in transportation from 2001 to 2005, 59%

13
Climate Action Tracker http://climateactiontracker.org/countries/southkorea.html
14
US Energy Information Administration 2014 http://www.eia.gov/beta/international/analysis.cfm?iso=KOR
 South Korea. Context and considerations for a Unions4Climate campaign

went to highways and 22% to railroad. In 2009 road transportation stood at 74.8% for
passengers and 79.2% for freight15.

Cleaner transportation is also crucial for health. Indeed, air quality in Korea's capital
region is among the worst in the OECD and the cost to human health of air pollution, as
caused by fine particulate matter, was estimated at 1% of GDP in 201216.

South Korea’s energy efficiency objective, which was established in its Basic National
Energy Plan 2008-2030, is to reduce energy intensity by 46 percent between 2007 and
2030. The overall energy savings goal for 2030 is nearly 38 Mtoe, 44 percent of which
should be achieved in industry (17 Mtoe), 32 percent in the residential and commercial
sector (12 Mtoe), 19 percent in the transport sector (7 Mtoe), and 5 percent in the
public sector (1.9 Mtoe)17.

The government is promoting support for development of technologies aimed at

enhancing energy efficiency, by strengthening fuel economy management and by
installing highly efficient equipment in both new and existing buildings.

Social and labour imbalances

Korean society faces other threats that are as urgent as the energy transition.
Emissions reduction policies must not be considered in isolation.

The social context has been deteriorating for the last two decades. Rising inequality
has squeezed the middle class from 75.4% in 1990 to 67.5% in 2010. Korea has
experienced a rise in relative poverty (8th in the OECD) and income inequality, and
49% of the elderly are living in relative poverty18.

The redistributive impact of Korea's tax and transfer system is among the weakest in
the OECD, and reflects low public social spending, which stood at 9.3% of GDP in 202.
1.4 million people (3% of the population) receive welfare, which is well below the 7-8%
living in absolute poverty19.

Although the 3.7% unemployment rate might be considered not particularly serious,
youth unemployment rate has reached 9% and South Korea is pushing part of the best
educated generation to social and labour exclusion. In addition, duality in the labour
market is dramatic, precarious employment and insecurity are increasing. Almost 33%
of the population are “non regular workers” who suffer discrimination in pay, working
environment and employment instability20.

Labour regulations have been progressively weakened and unions are currently
confronted by a new wave of reform: union organizations are fighting these policies
which they say will reduce wages and job security as well as maintain the economic
dominance of family-owned conglomerates (chaebol).

Economy and democracy

15
FES 2009 Green Growth and Green Jobs in Korea: Potentials and Perspectives http://www.fes-
asia.org/media/publication/2012_GreenGrowthAndGreenJobsInKorea_FES-EoT_Study_Hyun-woo_Jae-kak_Jin-hee.pdf
16
OECD 2014. Economic Surveys. Overview Korea http://www.oecd.org/eco/surveys/Overview_Korea_2014.pdf
17
ABB 2013 South Korea Energy efficiency report
http://www09.abb.com/global/scot/scot380.nsf/veritydisplay/557d50223ed20a76c1257beb0044f3bc/$file/South%20Korea.pdf
18
OECD 2014. Economic Surveys. Overview Korea http://www.oecd.org/eco/surveys/Overview_Korea_2014.pdf
19
OECD 2014. Economic Surveys. Overview Korea http://www.oecd.org/eco/surveys/Overview_Korea_2014.pdf
20
Kim 2015. Situation of non regular employees in Korea. http://www.ijssh.org/papers/432-C00025.pdf
 South Korea. Context and considerations for a Unions4Climate campaign

Some other factors must also be taken into account when considering and designing
low carbon policies. The Korean economic model, Chaebol, is an industrial policy that
led to the creation of almighty industrial conglomerates. This model was a response to
a lagging service sector and weak SMEs21.

However, this model has also generated a strong power imbalance, where
conglomerates hold such a big influence over the government that SMEs, citizens and
workers interests are often violated. Korean society is faced with the challenge of
“democratising” the economy; in other words, to bring about more justice and fairness
in the economy. For instance, the country’s economic policy needs to switch its focus
from Chaebol to small and medium-sized companies.

Despite this need, and after some consolidation following on from the 1997 crisis, the
number of chaebol-affiliated companies is once again increasing. Groups are looking
for new growth opportunities and this is fuelling criticism that they are encroaching on
markets that have been traditionally dominated by SMEs22.

Considerations for a unions4climate campaign

- Both emissions reduction ambition and the timeframe to reach this goal can be
improved if more resources are given to deploying renewable energies.
Globally, the focus on these investments is giving the best results on emissions
+ job creation. Large investments in the Four Rivers Project, which in fact were
6 times higher than for renewables, or the growing rumours of investments in
Shale Gas, are effectively significant deviations away from what has proven to
be much more efficient paths.

- Industry can and must improve its energy efficiency and invest more in research
on cleaner processes. Those industries close to optimum efficiency levels must
look to using cleaner energy. Furthermore, Korea's huge industry is not
sustainable if it continues to be based on foreign fossil fuels in an international
situation of rising energy prices - even with the short relief from last year’s
prices. Paradoxically, it is this same industry that will oppose transformation of
the country's energy mix.

21
OECD 2014. Economic Surveys. Overview Korea http://www.oecd.org/eco/surveys/Overview_Korea_2014.pdf
22
OECD 2014. Economic Surveys. Overview Korea http://www.oecd.org/eco/surveys/Overview_Korea_2014.pdf
 South Korea. Context and considerations for a Unions4Climate campaign

- Chaebol conglomerates' control over the Korean economy raises questions

about the effectiveness of looking to the emissions market for reductions. There
have already been serious debates about allowances given, and even conflicts
in some sectors. The European model has shown how big industry "cries wolf"
over potential losses, and is often supported by employees. This leads to
reduced ambition in the market, and hence which has finally proven useless.
Serious democratic deficits are present in Korean industrial policies such as
public transparency and respect for workers' rights. This means emission
trading is unlikely to be the best tool to meet the goal. At the very least, it would
be desirable to create a forum for social dialogue which involved business,
government, trade unions and social movements and who together could
monitor the effectiveness and real achievements of the emissions market,
improve its results and ambition. Bringing some democratic control on the
emissions market is crucial.

- Likewise, introducing renewables into the energy mix and energy efficiency
policies must also present a real opportunity for small and medium enterprises
and assist the diversification of the economy. Unions could support specific
measures to support SMEs in the low carbon transformation.

- In a society marked by precarious democracy, increasing inequalities, a serious

lack of social protection and increasing poverty it is fundamental to pay
attention to how transition costs are shared out. The vulnerable sector of
Korean society also must not be pushed into fuel poverty. Government policies
for the transition must include social justice criteria - something which has been
nonexistent to date.

- Labour rights and quality of employment must be guaranteed in the transition -

assaults on labour rights occur too frequently in all areas in Korea.

Concrete proposals to build upon

The possible elements for a trade union campaign which seeks to broaden climate
commitments must include: protecting the most vulnerable in society; respecting
workers' rights as a fundamental requirement; and civil society's democratic
participation in the transition.

- Confronting the lack of ambition of INDCs proposed. Unions are very important
critical voices in South Korea and they could raise their concerns to the
government. Public sector unions could lead if linked to campaigns on energy
democracy.

- Reducing additional emissions through investments in renewable energy: the

10% obligation for suppliers by 2020 will not suffice to put the Korean economy
in a low carbon scenario. Unions have assessed that in some renewable energy
companies, labour conditions are low, unionizing these companies have to be
part of the push.

- Reducing additional emissions through energy efficiency in businesses and

homes by getting workers and green reps to fully participate. In large
companies workers can make a big difference if they play a role in designing
and implementing energy efficiency policies in companies. One probable
 South Korea. Context and considerations for a Unions4Climate campaign

starting point might be working hour reduction accompanying energy

demand reduction in manufacturing sector.

- Reducing additional emissions through investments in public transport and rail

transport. Despite the political pressure from the government to fight
transportation unions, they could strengthen a broad social alliance to push for
sustainable mobility and rail promotion.

- Demanding climate equity and energy democracy: Creating social dialogue

forums to monitor social and labour impacts and prevent further aggravation of
poverty and vulnerability, for example due to energy poverty, is crucial.