As one of Australia’s largest trading partners – and one of the largest buyers of Australia’s fossil fuel exports – South Korea’s plans to green its economy have major economic implications for Australia. And as Korea is currently one of the world’s largest greenhouse gas (GHG) emitters, its greening plans also have significant environmental implications for the world.

Korea’s Green New Deal (GND) should be of serious interest to Australian policymakers, businesses, and citizens alike – insofar as it represents one of the world’s most ambitious plans to promote a rapid clean energy shift. In this briefing paper, we identify the key features of Korea’s GND, and the complex set of problems it is designed to address. We then canvas what we see as the main risks and opportunities presented by Korea’s GND for Australia. We conclude by discussing two major recent political developments – Russia’s invasion of Ukraine and its impact on fuel prices, and the election of Korea’s new President Yoon Suk-yeol – and their implications for the future of Korea’s green energy shift and the opportunities it presents for Australia.

Korea’s Green New Deal: Key Features

Korea’s GND was introduced in July 2020 by former President Moon Jae-in, as part of his administration’s broader Korean New Deal (“K-New Deal”), launched in response to the COVID-19 crisis. The K-New Deal comprised US$135 billion in investments in both green and digital technologies, including US$96.3 billion from the Korean Treasury, US$21.2 billion from local governments, and US$17.3 billion from the private sector.

As a key pillar of the K-New Deal, the GND allocated US$61.9 billion to green initiatives and aims to create 659,000 jobs by 2025. More importantly however, job creation is not the sole – or even primary – driver of the GND. At its core, the GND is a techno-industrial transformation strategy aimed at rapidly establishing Korea as a leader in the new technology-intensive, higher-skilled, higher-wage, export-oriented industries of the future. As we discuss in more detail below, the ultimate goal of this strategy is to solve Korea’s pressing economic, energy and environmental challenges in one hit by essentially manufacturing economic, energy, and environmental security.

To this end, Moon’s GND set some ambitious targets for 2025, aiming to:

• expand local solar panel and wind turbine capacity to 42.7 gigawatts by 2025, up from 12.7 gigawatts in 2019;
• install solar panels on 225,000 public buildings;
• rapidly roll out “smart grids” – a digital technology that allows an energy utility to communicate with and respond to its customers, and vice-versa; 
• install “smart meters” in five million more apartments, to help consumers reduce their electricity use;
• invest heavily in the creation of microgrid communities in regional areas and on Korea’s many islands. The vision is to create decentralised, low carbon energy systems (combining renewable energy generation and storage systems) in areas not linked to the grid – and a model that can be exported to the globe;
• have 1.13 million electric vehicles (EVs) and 200,000 hydrogen-powered fuel-cell EVson Korean roads by 2025. This will not only help to reduce carbon emissions but create a domestic market for Korean car manufacturers such as Hyundai;
• roll out 45,000 electric vehicle recharging stations (15,000 rapid and 30,000 standard) and 450 hydrogen refuelling units, benefiting homegrown firms such as EM Korea;
• implement circular economy initiatives such as reducing and recycling energy using advanced computerised power grids in factories. The plan also involves technology to capture and store carbon emitted from industrial processes and re-using industrial materials.

Alongside these green industry creation efforts of the GND, the Moon administration also introduced measures to expedite fossil-fuel industry dismantling, including commitments to:

• Achieve Net Zero by 2050;
• secure a 100 per cent renewable energy (RE) future, including 20 per cent RE production by 2030. To put these targets into perspective, under the former LNP government, Australia did not establish any RE targets beyond 2020;
• phase out coal-fired power by 2050 and nuclear power by around 2060;
• reduce the nation’s dependence on oil and gas imports by gradually replacing the same with clean hydrogen. With its major emphasis on Hydrogen, the GND lent fresh momentum to Korea’s landmark Hydrogen Economy Roadmap (2019). The long-term emphasis of this plan is hydrogen derived from zero emissions / renewable sources (i.e. green hydrogen). Clean hydrogen is predicted to become Korea’s largest energy source by 2050, making up 70 per cent of total hydrogen use. Korea’s state-owned utility KOGAS will be transformed from a natural gas supplier into a hydrogen platform operator.

With its dual emphasis on clean energy industry creation and fossil-fuel industry phase-out, Korea’s GND stands out as one of the most ambitious national greening strategies in the world. The Deal thus attracted significant global attention upon its announcement – showing the world what a smart green recovery from COVID-19 could look like.

The GND as a strategic state response to pressing security challenges

While the scale and scope of the Korean government’s GND is striking, the ambition it embodies should not surprise, at least for those familiar with Korea’s modern economic history.

Since the early-1960s, Korea has built its reputation as a state that is both willing and able to respond to pressing security challenges via strategic, long-term economic development plans. In the wake of the devastating Korean War that left the country divided in two, Korean policymakers formed the view that building a strong, manufacturing-based, export-oriented economy was the key to national survival.

From the 1960s to the early 2000s, Korea stunned the world with its ability to rapidly catch up with and then surge ahead of many developed countries, first in traditional heavy industries like automobiles, shipbuilding, and petrochemicals, and then in information-technology (IT) related industries like telecommunications, semiconductors and computer hardware.

But there was a major problem with Korea’s rapid growth model as it emerged and consolidated in the second half of the twentieth century – its overwhelming reliance on cheap fossil fuel imports. As a resource-poor nation, Korea was – and remains – almost entirely dependent upon imports of oil, coal, and gas to meet the needs of its energy-hungry manufacturing-led economy. This dependence leaves Korea vulnerable to the inevitable fluctuations in international energy prices; when energy prices spike, so the competitiveness of Korean exports declines, often plunging the country into crisis.

Korea’s traditional fossil-fuelled growth model also has major environmental consequences; the particulate pollution that spews from the country’s manufacturing and power generation plants often shrouds the country in a hazardous smog, causing disastrous health and environmental problems for the Korean people, and major political problems for Korean governments at all levels. These environmental challenges have only been amplified by growing climate change concerns.

In light of these complex and interrelated challenges, since the 2008 Global Financial Crisis, Korea has been on a mission to transform its traditional ‘brown growth’ model into a new ‘green growth’ model via the rapid development of the clean, green industries of the future. Korea’s concern to remain competitive with China’s increasingly aggressive economic expansion and its own green push in export industries has also been a major (if often unspoken) driver of Korea’s increasingly ambitious greening push since 2008.

Viewed in this light, the GND represents both continuity and change in Korea’s approach to strategic economic governance. The Korean government continues to view a strong, technology-intensive, manufacturing-led economy as the key to its long-term prosperity and national security. And Korean policymakers continue to envisage a strategic role for the state in helping to build and sustain new manufacturing-related industries, in close partnership with the private sector. However, in a significant break with the past, policymakers are now seeking to transform the fossil-fuelled energy system that has long underpinned its manufacturing intensive economy, in order to simultaneously advance its interrelated energy, economic and environmental security goals.

The GND: Risks and Opportunities for Australia

Korea’s GND poses significant risks and opportunities for Australia. As one of the largest markets for Australian fossil fuel exports, including coal and gas, Korea’s green shift will inevitably serve to throttle sales of these commodities – and arguably sooner than later. Korea has already ruled out a future for coal, pledging to phase it out completely by 2050. As for gas, Korea currently envisages a role for it as a ‘bridging fuel’, a medium-term reliance viewed as a means of avoiding stranded gas infrastructure assets. However, with the recent change in US leadership, Korea will be under increasing pressure to honour its net zero pledge. And as methane emissions from gas production are the worst culprit when it comes to climate change, the idea of gas as a bridging fuel cannot be justified on environmental or climate grounds.

Moreover, continued investment in gas projects diverts funds away from investments in renewable energy sources – not least green hydrogen – delaying the cost reductions that would inevitably follow from more aggressive investment efforts. Insofar as Korea wishes to establish itself as a pioneer in the green hydrogen arena, and reap the first-mover rewards, there is every chance that Korea will move more quickly to replace gas-fired hydrogen with green hydrogen. Evidence of its ambitions in this regard can been seen in Korea’s moves to pioneer the development of a clean (read: carbon neutral) hydrogen certification system to guarantee that its hydrogen imports are truly green.

Fortunately, while Australia’s fossil fuel industries face a grim future, Korea’s GND – and its emphasis on green hydrogen in particular – creates ample economic and environmental opportunities for Australia and its exporters. As we have argued elsewhere, the sheer scale of these opportunities is well appreciated among Australia’s policy elite, both federally and at state level, and are clearly outlined in Australia’s 2019 National Hydrogen Strategy. This landmark document shows that by turbocharging a clean hydrogen industry, Australia could dramatically reduce its fossil-fuelled energy imports and vastly expand its clean energy exports, creating around 7,600 skilled and semi-skilled jobs, and adding about AU$11 billion each year to Australia’s GDP by 2050. Moreover, should more ambitious technological advances arrive more rapidly than anticipated, the upside could be even greater: 10,000 extra jobs and at least AU$26 billion increase in GDP per annum.

To these opportunities we can add the probable rapid reduction in local energy prices, which would help to revive Australia’s techno-industrial base. By making energy-intensive manufacturing viable for Australia, lower energy prices could also see the re-shoring of the country’s long-lost materials-processing industries. Once again, Australia could emerge as a world-leading exporter of (clean) steel and aluminium, derived from green hydrogen use in place of coal. This would further diversify Australia’s value-added export base and open new market opportunities abroad – not just in Korea, but beyond.

To these economic opportunities of a green hydrogen shift we would add the geostrategic opportunity to diversify Australia’s export base away from China, and to signal to the Pacific region that by moving away from natural gas Australia – finally – is serious about tackling climate change. China’s newly invigorated courtship of Australia’s Pacific neighbours renders this path not just desirable, but imperative.

Do New Developments Mean a New Direction for Korea’s GND?

In March 2022, Russia’s invasion of Ukraine sent shockwaves through global energy markets, pushing the price of gas to new highs, and significantly inflating the price of oil – two key Russian exports. The pain of these higher fossil fuel prices is now being felt acutely across the Asia Pacific and especially in Korea. Currently, Korea relies on Russian imports to meet around five per cent of both its oil and gas needs, and around 17 per cent of its coal requirements.  

Insofar as the Russia crisis has amplified Korea’s longstanding energy security concerns, there is every chance that it will lend even greater momentum to the country’s push to reduce its reliance on fossil fuel imports via a more aggressive clean energy shift. Indeed, upon coming to power in early 2022, the Yoon administration announced its intention to reduce the share of coal and gas in the energy mix to between 40 and 45 per cent by 2030, and to ramp up the country’s efforts to transition to a hydrogen society.   

The Russia crisis is also serving to shape the direction that the clean energy shift takes in Korea, not least by exposing the risks of reliance on gas as a ‘bridging fuel’, and by heightening local tensions over the most desirable pathway towards decarbonisation.

Under former President Moon (2017-2022), the Korean government had pledged to phase out coal and nuclear. To realise this goal, Moon proposed to rely on gas as an affordable ‘bridging’ fuel while the country ramped up renewables. While the idea of coal phase-out proved politically popular given Korea’s perilous particulate pollution problems, abandoning nuclear proved far more contentious. Some experts and politicians remained adamant that nuclear had an important role to play in Korea’s long-term quest for energy, economic and environmental security. 

The Russia crisis exposed the risks in Moon’s strategy; by the time the crisis hit, Korea had emerged as the world’s fourth largest importer of LNG, and so felt the pain of higher gas prices acutely. The Russia crisis thus lent momentum to Korea’s pro-nuclear voices, including then Presidential hopeful Yoon Suk-yeol.

President Yoon came to power pledging to expand the role of nuclear power in Korea’s ‘clean energy’ mix. According to Yoon, meeting Korea’s Net Zero by 2050 pledge via 100 per cent renewables would be too costly for the country, especially for industry. Yoon has thus promised to expand domestic investment in nuclear, and to develop the newest generation of small modular reactors as a strategic export industry.

Yoon’s new emphasis on nuclear has sparked fears of a reduction of investment in renewables, and a reversal of Korea’s Net Zero commitments. However, Yoon will face many domestic obstacles to reviving nuclear locally, in light of the divisiveness of this issue. Moreover, Yoon remains firmly committed to Korea’s 2030 carbon reduction targets, and any move to alter the country’s 2050 obligations would meet fierce global criticism, not least from Korea’s major strategic partner, the United States.

At the same time, international investments in renewables will continue to drive costs down, and the Korean government and businesses remain steadfast in their desire to maintain and extend the country’s competitiveness in the global renewables race, and to stay ahead of China in the green hydrogen race. To scale back investment would be to cede ground to China in this crucial advanced technology industry. Since the Russia crisis, China has been ramping up its renewables to offset associated price shocks. Most recently, China announced a major push into green hydrogen, which is expected to expand rapidly in the coming years.

Like China, Korea will be anxious to capitalise on the more vigorous pursuit of renewables, including green hydrogen – already underway in Europe, again as a consequence of the Russia crisis. In early March 2022, the EU announced a plan – REpowerEU – to become independent from Russian oil and gas by 2030, largely through the promotion of renewables. This plan will potentially increase already significant demand in the EU for renewable energy products from Northeast Asia’s powerhouse economies (such as EVs, batteries, fuel cells). This in turn will further drive down the costs of renewables and green products, encouraging greater domestic uptake. 

Regardless of Yoon’s nuclear plans, Korea’s electricity operators will still have to work within the ambitious renewable energy targets set by the Moon administration. As recently as October 2021, the Ministry of Trade Industry and Energy (MOTIE) revised the country’s renewable energy portfolio standard, mandating that energy companies source at least 25 per cent of their energy from renewables by 2026, up from 9 per cent previously. Then in January 2022, MOTIE announced that it would finally allow renewable energy providers to sell electricity directly to industrial and retail consumers – removing a longstanding obstacle to the widespread roll-out of renewables. For these reasons, the revival of the nuclear debate in Korea is unlikely to come at the expense of renewables plans.

For all these reasons, we see Korea’s ambitious clean energy push as likely to continue under Yoon, for reasons not just environmental, but economic and geostrategic as well. Australia’s new government is well aligned with the Yoon administration on all these fronts. Finally, Australia seems well placed to seize on the opportunities presented by Korea’s clean energy shift, and to start learning from the Korean experience of manufacturing environmental, energy and economic security.

Dr Elizabeth Thurbon is a Scientia Fellow and Associate Professor in International Political Economy at  UNSW Sydney and a Visiting Fellow of The Asia Society. Dr Sung-Young Kim is a Senior Lecturer in International Political Economy at Macquarie University. Dr Hao Tan is an Associate Professor in International Business at The University of Newcastle. Professor John Mathews is Professor Emeritus of Strategic Management at Macquarie University.  Together they are Chief Investigators on the Australian Research Council funded Discovery Project East Asia’s Clean Energy Shift: Enablers, Obstacles, Outcomes, and Lessons (2019-2023). You can find out more about this project at: developmental-environmentalism.org

The Australia and Korea: Middle Power Parallels project is supported by the Commonwealth through the Australia-Korea Foundation, which is part of the Department of Foreign Affairs and Trade. This project is undertaken in partnership with Asia Society Korea.