[The Korea Herald] Is green growth working?

By John Power

“Green growth” has been an oft-used phrase in political, environmental and scientific circles in recent years. President Lee Myung-bak first announced his vision for environmentally sustainable, low-carbon economic growth in an address to the nation in August 2008. In July 2009, the government unveiled the Five Year Plan for Green Growth, which allocated some $84 billion for investment in growth drivers and infrastructure deemed environmentally sustainable.

Green growth, as defined by the Presidential Committee on Green Growth, aims to achieve “economic development and job creation, as well as efficient use of resources and environmental protection.”

With the country importing about 97 percent of its energy sources, Korea’s drive could be seen as a necessity. The country is also considered especially vulnerable to the effects of climate change: Average surface temperatures in Korea rose by 1.74 degrees Celsius between 1912 and 2008, according to the United Nation’s Environment Program, higher than the world average.

Aspirations and reality

But despite this and rhetoric about going green, Korea remains the world’s ninth biggest emitter of CO2. In a further mismatch between aspirations and reality, the June 20-22 Earth Summit in Rio de Janeiro ended without a concrete plan for global action against climate change and environmental degradation. Korean Environment Minister Yoo Young-sook spoke after the summit of her disappointment that some countries had failed to embrace the idea of a “green economy.”

Despite pessimism surrounding the summit’s outcome, Park Hyun-jung a member of the Green Growth Planning Bureau at Presidential Committee on Green Growth, denies that little was achieved.

“There are critics saying that the outcome of Rio+20 Summit fell short of the highest expectations including the lack of a concrete action plan,” Park told the Korea Herald.

“However, the fact that U.N. member countries with various interests have reached for the first time an agreement on ‘green economy’ as a major tool to achieve sustainable development holds significance.”

If Korea’s success in encouraging other countries to follow its path is an open question, so too is the likelihood of it meeting its own targets.

“Targets are just indicators of where the government wants to lead the economy,” said Lee Ji-soon, an economics professor at Seoul National University. “And they are based on lots of assumptions. When situations turn out differently, targets will not be met.”

As part of its long-term strategy toward 2030, the government aims to reduce the nation’s energy intensity level by 46 percent, from the current 0.341 ton of oil equivalent per $1,000 to 0.185 TOE/$1,000, and reduce fossil fuel use from the current 83 percent of energy consumption to 61 percent. Energy intensity is a measure of energy efficiency, referring to the amount of energy, measured in units equivalent to that provided by a ton of oil, required to produce $1,000 of GDP.

Park, however, insists that these are achievable targets, pointing to measures implemented this year such as the emissions trading scheme and Green Building Act, and the fact that the rate of increase in energy consumption dropped from 2005-2010.

“The target energy intensity of 0.185 TOE/$1,000 in 2030 when Korea is expected to reach its GDP per capita of $30,000, is an average between 0.27 of the United States in 1994 and 0.11 of Japan in 1988 when their GDP per capita reached $30,000. The target will be met when Korea’s annual economic growth stands at 3.7 percent and the annual average rate of energy demand increase is limited to 1.2 percent (from 2.7 percent in 2010),” said Park.

“If Korea continues its efforts to rationalize the energy pricing system and transform into an industrial structure, those targets will be achieved.”

But selling the general public and businesses on some green growth solutions has proved difficult. While the government aims to have Korea producing 1.2 million electric, hybrid and fuel-cell vehicles by 2015 ― 900,000 of them for export ― consumers here and abroad have yet to warm to the models produced so far.

Hyundai Motor and Kia Motors’ sales of hybrids have been a fraction of their gasoline equivalents, with Hyundai’s Avante, as one example, selling just 118 units domestically in May. In the U.S., General Motors suspended the production of its Volt electric car earlier this year due to poor sales, hitting LG Chem, the producer of the car’s lithium-ion batteries.

Private sector

Developing alternative-energy vehicles has cost the taxpayer, too. The Hyundai BlueOn, the country’s first full-speed electric car due to go on sale later this year, was developed with 9.4 billion won ($8.2 million) in government investment. The case of the BlueOn and other green growth projects also goes to the heart of philosophical questions about the role of government.

The concept of the government picking so-called winners and losers has been controversial in the U.S., as highlighted in the bankruptcy last year of Solyndra, a solar energy company that had received over $500 million in federal loans.

“There always exist dangers with any kind of industrial policy,” said Lee. “However, in the past Koreans engaged in many kinds of industrial policies, and several of them bore ample fruit. Perhaps policy makers think they can repeat the success stories.”

Even with the risk of unproductive investment, government support is necessary because of private sector reluctance to invest in new environmental projects and technologies, according to Lee.

“Due to failures arising from public goods aspects, severe externalities, short sightedness of market participants, coordination failures, and large risks involved, environmental and resource projects need public support, at least in the initial stage. These are new areas where private firms are very hesitant to move in.”

As far as Park is concerned, green growth investment is already seeing tangible results.

“(Between 2007 and 2010) new and renewable area employment increased by 3.7-fold, sales by 6.5-fold, exports by 7.3-fold,” said Park, who also cited the construction of the world’s largest tidal power plant at Shihwa Lake as an example of investment in action.

But for many in the environmental movement the current administration’s commitment to green growth is little more than window-dressing. Groups such as Green Korea United take issue with the government’s pursuit of nuclear energy and controversial infrastructure works such as the Four Major Rivers Project, and say its emission reduction targets do not go far enough.

“We are the No. 9 energy consuming country in the world and keep making CO2 emissions, so it means we need a more intensive demand control policy in our energy sector,” said Lee Yu-jin, a member of Green Party Korea and former member of Green Korea United.

“We need some localized energy system, an energy tax, and also the price of electricity compared with other countries is low in Korea, and especially in industry compared with ordinary people.”

Public services

For Lee and many other environmentalists, the government’s concept of green growth avoids the central issue: Korea uses too much energy and has come to expect too much economic growth.

“We need to consider: keep growing the economy, is it possible or not? … Now, I think we need to talk about less growth,” said Lee.

But to make this message palatable to the general public, the government must be willing to provide more public services, she said.

“If some services are provided by the government, and if we earn less money, then we can get similar services. Until now, government (has) invested money for construction, nuclear power plants, the four river dam project … If we change our policy from hardware to software ― meaning, investing money in the community and the people and social infrastructure ― then we can support … people’s lives.”

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