Energy policy and sustainability in Korea
South Korea, one of Asia's most advanced economies, has been taking significant steps to address the challenges of climate change and promote sustainability. This report details the efforts and actions the country is implementing, from government initiatives to the adoption of advanced technologies, with the aim of delivering a greener and more sustainable future.
Government Initiatives:
South Korea's energy policy has focused on ensuring stable and affordable supply for its economic growth since the 1990s, initially through public monopolies and government regulations. With the First Energy Master Plan in 2008, sustainable development was sought by balancing energy security, economic growth and environmental impact, promoting the use of nuclear and renewable energy. The Second Energy Master Plan in 2014 focused on managing electricity demand, improving nuclear safety, diversifying supply routes and reducing dependence on energy imports. However, South Korea faces dilemmas such as inefficient resource allocation, low electricity prices that hinder the adoption of renewable energy, and challenges in implementing its renewable energy plans. Alternatives include encouraging investment in “green” technology, reforming renewable energy project planning, and improving energy demand management.
National Energy Plan
By 2023, South Korea gets 61.67% of its electricity from fossil fuels, mainly coal (33%) and gas (28%), while 38.33% comes from low-carbon sources, with nuclear power contributing 29.39%. Solar power and biofuels contribute modestly with 4.78% and 3.01% respectively. To increase low-carbon electricity generation, South Korea could expand its nuclear facilities, following successful examples such as France, Slovakia, and Ukraine, and encourage wind power, taking inspiration from Denmark and Ireland. The country's low-carbon energy history shows remarkable growth in nuclear power since the 1980s, albeit with recent fluctuations, and a significant increase in solar power in 2020.
In 2022, South Korea has decided to resume construction of the Shin-Hanul 3 and 4 nuclear units, with the goal of having nuclear power account for at least 30% of electricity production by 2030, thus reversing the previous policy that sought to phase out nuclear reactors. President Yoon Suk-yeol views the construction of nuclear plants as a global trend and crucial for carbon reduction and energy security. The new policy seeks to replace the previous nuclear phase-out plan and promote Korean nuclear technology abroad, establishing working groups in various embassies to secure international contracts. South Korea currently operates several APR-1400 units and plans to invest in the development of next-generation small modular reactors.
·Green New Deal:
In 2021, South Korea launched an ambitious Green New Deal with the goal of achieving carbon neutrality and fostering an inclusive economic recovery following the COVID-19 crisis. The plan, which calls for $144 billion in investment and the creation of 1.9 million jobs by 2025, focuses on renewable energy, green infrastructure and sustainable mobility. It also includes subsidies for electric vehicles and regional development initiatives. Korea presented its Carbon Neutral Strategy 2050, aiming to phase out coal plants or convert them to natural gas. Despite being a major importer of coal, the country seeks to accelerate the adoption of clean technologies, relying on its strong digital infrastructure and leadership in research and development. The government also plans to continue with stimulus packages for small businesses and launch the K-New Deal Fund. This effort is supported by collaborations with international organizations and webinars to share experiences and policies on green recovery.
Commitment to the Environment
In 2020, South Korea presented a long-term energy plan that seeks to dramatically increase the share of renewable energy in its energy capacity by 2034, from the current 15% to 40%. This involves closing all coal-fired power plants whose 30-year operating lifespan expires by 2034, affecting half of the plants in operation. In addition, the plan includes converting 24 of these plants to liquefied natural gas (LNG) to avoid power shortages, while reducing the share of nuclear power from 19% to 10% by 2034.
Para el 2021, Corea del Sur podría ser más ambiciosa en su objetivo de energías renovables para 2030, según un informe de Wood Mackenzie del 2021. El noveno plan básico del país espera que las energías renovables representen el 34% de la capacidad eléctrica para 2030, pero Wood Mackenzie sugiere que esta cifra podría aumentar al 38%, con una inversión anual promedio de 8,900 millones de dólares. El plan incluye objetivos de 34 GW para energía solar y 18 GW para eólica, aunque se anticipa que la capacidad solar podría superar las expectativas. Sin embargo, el gas natural y el carbón seguirán jugando un papel significativo, aunque se proyectan desafíos para la expansión del gas y un eventual decrecimiento del carbón. Para alcanzar la neutralidad de carbono en 2050, Corea del Sur también está impulsando la producción y uso de hidrógeno, con planes de cubrir el 80% de su demanda futura mediante importaciones.
Challenges and Future Outlook
South Korea faces significant costs due to its dependence on fossil fuels in its energy mix, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA). The report highlights that the high share of fossil fuels, especially liquefied natural gas (LNG), in the country's energy mix has contributed to rising electricity prices, costing it around $17 billion extra in one year. The delay in the transition to cleaner and renewable energy sources, coupled with artificial pricing of energy, have exacerbated the financial problems of the state-owned Korean electric power company (KEPCO). The report calls for reducing dependence on fossil fuels, reforming energy prices, and accelerating the transition to renewable energy to mitigate rising energy costs and achieve decarbonization goals. – An energy mix based on fossil fuels cost South Korea an additional $17 billion in one year.
The Convenience Store Phenomenon in Korea
History and Evolution:
The history and evolution of convenience stores in South Korea dates back to the opening of the first 7-Eleven branch in 1982 in Seoul. Although they initially faced challenges due to people's unfamiliarity with the concept, over time they became an essential part of Koreans' daily lives. Today, there are five major convenience store brands in Korea, known as the 'Big 5', including GS25, CU, 7-Eleven, Emart24 and Ministop.
GS Retail, a subsidiary of Korean conglomerate GS Group, operates brands such as GS25, GS The Fresh and Lalavla, offering a wide range of services and products. CU, initially a licensed brand from Japan's Family Mart, became an independent brand in 2012 and has been notable for its collaboration with chef Baek Jong-won and its line of dosirak. 7-Eleven was the first convenience store to open in Korea, though it closed its doors in 1984 due to unfamiliarity with the concept back then. Emart24, a subsidiary of Emart, features products from Emart and No Brand, while Ministop, wholly owned by Japan’s AEON Group, is known for its freshly cooked food.
Aside from offering a variety of essential products, Korean convenience stores have also adapted to changing market trends, offering vegan options and special launches such as dalgona snacks inspired by the popular dalgona coffee trend and Binggrae’s flavored milk selection. These stores are a central fixture in the lives of Koreans, providing convenience and a wide variety of options to meet consumer needs.
Impact on Daily Life
·Accessibility and Convenience
The growing popularity of convenience stores in Seoul, promoted by their viralization on social media and in particular on TikTok. These stores, known as ‘konbinis’, have become essential tourist destinations, attracting both locals and visitors fascinated by their effervescent and vibrant culture, offering a wide range of delicious snacks, anime-inspired merchandise and local drinks. With around 40,000 convenience stores nationwide, including prominent franchises such as G25 and Emart24, these stores offer a unique dining experience, with automated self-checkout systems and innovative options such as cook-and-eat areas. This trend also syncs with the current boom in South Korean cuisine, known as K-Food, which has captured global attention and enriched the cultural experience in Seoul.
Variety of Products and Services
Convenience stores in South Korea, known as “konbini,” are central to daily life in the country, notable for their 24-hour availability and automated operation. While some are staffed, many operate without the need for human interaction. They are popular on social media, where shopping experiences are shared. They offer a wide range of products, from food and toiletries to mail services and ATMs, albeit at slightly higher prices than traditional supermarkets. Located in residential areas and busy places, these stores reflect local culture by offering dishes such as tteokbokki and samgak kimbap, as well as quality coffee and craft beers. They are an integral part of daily life and a popular way to explore Korean cuisine and culture.
Integration into Culture and Community
Social Role:
Convenience stores, known as “konbini,” play a significant social role in South Korea, being popular destinations for tourists and locals. These 24-hour, unattended establishments offer a wide variety of products and services, from food to fast food services and places to sit and eat. Their presence has become a cultural phenomenon, reflected on social media, especially on TikTok, where they rack up millions of views. They are an integral part of everyday and tourist life in South Korea, serving as places to socialize, eat and experience local culture.
Foreign Investments in South Korea
Ease of Doing Business
To succeed in the South Korean market, it is crucial to understand its advanced economy and robust financial system. South Korea, with a highly industrialized and export-dependent economy, offers unique opportunities for international businesses. Knowledge of the won, banking, and financial regulations is essential to effectively manage operations and contracts. Effective communication, including mastery of the Korean language and respect for its honorific levels, is critical to establishing successful business relationships. In addition, Seoul, as an economic and cultural center, offers a dynamic environment that combines tradition and modernity, essential to any business strategy in South Korea.
South Korea is one of the most attractive economies in the world, excelling in the electronics, automotive, and construction industries. However, establishing a company there can be complex due to new labor laws and regulatory requirements. Investors should be aware of the types of business entities available, such as joint stock and limited companies, and the importance of obtaining industry-specific permits. The incorporation process includes several steps: foreign investment reporting, document preparation, tax registration, and bank account opening. It is recommended to seek legal advice to ensure regulatory compliance and facilitate the incorporation process.
Global Ranking
Foreign direct investment (FDI) in South Korea, although it decreased in 2022, shows a recovery with a significant increase in 2023, especially in sectors such as chips, batteries and transportation. South Korea attracts investors for its economic development and specialization in new technologies, although it faces regulatory and competitive challenges. The government offers incentives such as cash rebates and tax breaks to attract investments in key sectors. Despite restrictions in certain sectors such as nuclear energy and broadcasting, South Korea stands out for its advanced infrastructure, high labor qualification and strong financial position, although regulatory complexity and high labor costs can be obstacles.
Key Facts
To set up a business in South Korea, a minimum of 14 to 21 business days and a minimum investment of KRW 100 million are required for foreign-invested companies. Funds can be raised through equity, parent-subsidiary loans, or working capital. There are three main types of investment structures: subsidiaries (Chushik Hoesa and Yuhan Hoesa), branches, and representative offices, each with different legal and operational requirements. Tax incentives include significant deductions for technology investments and Foreign Investment Zones. Tax rates range from 11% to 27.5% for corporations and 6.6% to 49.5% for personal income, with mandatory pension coverage. South Korea is noted for its ease of doing business, ranking highly in World Bank reports.
Government Policies to Attract Foreign Investors
Tax Incentives
CAF, the development bank of Latin America, signed two agreements with Korea Eximbank to promote sustainable development in Latin America and the Caribbean. The first agreement is an Interbank Credit Facility for up to USD 200 million, intended for CAF projects involving exports of Korean goods and services and support for local companies in business with Korea. The second agreement is for co-financing, focusing on parallel financing and strengthening the economies of CAF shareholder countries with loans, capital and guarantees. These agreements seek to attract more financing and investment to the region, continuing a relationship that began in 2006 with an initial loan of USD 20 million.
Conditions for Foreign Direct Investment
Economic and Political Stability
South Korea ranks fifth in the 2020 "Doing Business" ranking, which classifies 190 countries according to the ease of doing business. This country maintains its position from the previous year, standing out for the simplicity of connecting to the electricity grid. The 2017 report introduced the evaluation of post-tax filing and payment processes. The ranking has undergone methodological changes since 2015, which affected the positions of some countries between 2013 and 2014. South Korea continues to be one of the most accessible places to do business.
Foreign Investment
South Korea has embraced an open market economy, allowing foreign investment freely and encouraging its companies to invest abroad. Seeking to become a financial and logistics hub in Northeast Asia, the country has signed Free Trade Agreements (FTAs) with numerous countries and offers various benefits to foreign investors, such as tax incentives and land support. In addition, the South Korean government encourages Foreign Direct Investment (FDI) through financial benefits and rights protection. With major infrastructure such as Incheon International Airport and several seaports, South Korea is poised to handle increased volumes of international trade, strengthening its position as a crucial logistics hub in the region.
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