By Kim Sung-woo
Kim Sung-woo
Feb. 10, 2024, marks the first day of "Gapjinnyeon," or the year of the blue dragon on the lunar calendar. The dragon, a mythical creature found in many different cultures all across the world, has long been believed to bring clouds and rain to drought-stricken areas. Back in the days when Korea was a predominantly agricultural society, in particular, this imaginary animal was believed to bring the right type of weather, helping to protect and grow crops, the most valuable resource at the time.
Perhaps nice weather is on the wish list for modern Koreans as well, given how severe some past weather has impacted the country. However, unfortunately, the prospect is even more depressing this year since the World Meteorological Organization officially declared 2023 to be the hottest year in history and predicted that 2024 may even break this record.
Large CO2 emissions from industrial sectors and people's day-to-day lives matter. In addition, the World Economic Forum published the Global Risks Report 2024 in time for the Davos Forum in January 2024, which presented the findings of a survey that captured insights from about 1,500 global experts. When asked about the current risk landscape, survey respondents picked extreme weather as the top risk we faced in 2024, over AI-generated misinformation and disinformation or societal and political polarization.
The situation in Korea is particularly serious. In August 2023, a research team at the Graduate School of Business at the University of Chicago analyzed the carbon emissions of about 15,000 listed companies worldwide. Their research revealed that a carbon damage cost, which is the product of a particular company’s greenhouse gas emissions and a social cost per ton of greenhouse gas ($190/ton), averaged 44 percent of the company's operating profit in Korea. This cost-to-profit ratio was the highest among the 17 countries researched. What should Korea do in 2024?
First, thinking about a climate crisis from a trade perspective is critical in securing a competitive edge in the global trade war. Climate change responses have recently been fragmented due to weakening international cooperation in the wake of U.S.-China frictions and the Ukraine-Russia war. Among those developments, the U.S. and the EU in particular have started connecting efforts to mitigate climate change with their trade laws and policies, and we expect to start seeing the outcomes of these new regulations and policies in 2024.
Investments under the U.S. Inflation Reduction Act (IRA), which grants subsidies to clean energy, will become more visible. Starting last month, the EU’s Carbon Border Adjustment Mechanism (CBAM), which will impose a carbon tax on imported goods, required the reporting of carbon emissions for each imported good. The U.S. is also moving in a similar direction, with the "PROVE IT Act” (Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency Act) underway. On Jan. 18, 2024, the PROVE IT Act made its way further into the legislative process to build a foundation for introducing a carbon border adjustment system in the U.S. These lines of development in different parts of the world are pressing Korean companies to measure and reduce carbon emissions from their products for export across their supply chains. The competitiveness of exports will depend on how much less carbon emissions the product produces.
Climate technology is another pressing action item. Among various climate technologies such as carbon emission reduction, clean energy, and resource circulation, renewable energy has seen remarkable growth in relevant facilities, adding 507 GW in capacity in 2023. This is about a 50 percent increase compared to the preceding year and also the biggest growth in the past 20 years. In 2024, competition to secure climate technology will intensify.
Climate technology is also deeply related to the trade issues explained above. For example, the IRA subsidies effectively reduced technology prices of green hydrogen by about 50 percent. CBAM charges increased demands for new carbon reduction technologies. The reality is, however, that companies are facing challenges in making substantial decisions in securing climate technologies in the absence of clear policy signals for regulations in the near future and technical support. One solution could be a patent data analysis. Patent data is known to account for 80 percent of current technologies, and we have more than 2.1 million patent cases for climate technologies.
Patent data combined with big-data analysis along with expert interviews and scientific papers will be a powerful tool for companies having to make an important decision on whether to invest in certain climate technologies. In fact, one of the companies that owned a nanofiber technology and had been using this technology only for water filters, was able to expand to new markets such as gas turbines, adhesives and heaters by utilizing patent big data analysis.
If Korea had a resume, her future would not look that grim. Korea is an export-driven economy. Its international trade accounts for 85 percent of its GDP. A lot of its exports already rely on maintaining technological leadership in relevant markets. The evolution of international trade and the era of climate technologies can be a rainmaker for Korea. Merely praying for a blue dragon and hoping to have rain for drying crops will not accomplish this of course. Companies should attend to the key action items for 2024 to survive and thrive. This will be one of the most challenging years in the battle against the climate crisis.
Kim Sung-woo is head of Environment & Energy Research Institute at Kim & Chang.
Korea's things to do in 2024
24
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12.02.2024
By Kim Sung-woo Kim Sung-woo
Feb. 10, 2024, marks the first day of "Gapjinnyeon," or the year of the blue dragon on the lunar calendar. The dragon, a mythical creature found in many different cultures all across the world, has long been believed to bring clouds and rain to drought-stricken areas. Back in the days when Korea was a predominantly agricultural society, in particular, this imaginary animal was believed to bring the right type of weather, helping to protect and grow crops, the most valuable resource at the time.
Perhaps nice weather is on the wish list for modern Koreans as well, given how severe some past weather has impacted the country. However, unfortunately, the prospect is even more depressing this year since the World Meteorological Organization officially declared 2023 to be the hottest year in history and predicted that 2024 may even break this record.
Large CO2 emissions from industrial sectors and people's day-to-day lives matter. In addition, the World Economic Forum published the Global Risks Report 2024 in time for the Davos Forum in January 2024, which presented the findings of a survey that captured insights from about 1,500 global experts. When asked about the current risk landscape, survey respondents picked extreme weather as the top risk we faced in 2024, over AI-generated misinformation and disinformation or societal and political polarization.
The situation in Korea........
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