Page 5 - AsiaElec Week 35 2021

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South Korea’s oil funding calls

green commitments into question

SOUTH Korea provided $127bn in support neutrality drive.”
SOUTH KOREA for overseas oil and gas projects between 2011 “To minimise risk to the Korean economy
and 2020 as government-backed development and public funds, and to demonstrate climate
finance institutions (DFIs) continued to back leadership, Korea needs to rapidly stop the pipe-
fossil fuels as the government talked up green line of overseas fossil fuel projects like public
energy. institutions in the United Kingdom, Sweden and
A new report from South Korean research United States.”
and advocacy organisation Solutions for Our The report broke down the support into
Climate (SFOC) found that the $127bn of loans, $32.2bn (25%) for upstream projects, $49.7bn
grants and export insurance was 13 times larger (39%) for midstream and $45.1 (36%) for down-
than that provided for coal-fired generation pro- stream projects.
jects abroad in the same period. Geographically, the Middle East is the biggest
Previous research from SFOC in 2019 had host of projects financed by South Korean public
found that coal financing totalled just $10bn. funds ($35.3bn) over the past 10 years, followed
The country’s shipbuilding giants, which are by Central Asia ($10.1bn). The rest of Asia –
world leaders in the oil and LNG sector, are the Southeast Asia, South Asia, and East Asia – is the
biggest beneficiaries of state support. third largest, with $6.8bn deployed to the region.
The issue at stake is that while investors, gov- In the upstream sector, Australia is the biggest
ernments and banks have all stepped up their host of projects with Korean support of $3.6bn,
commitments to renewables, sustainability and followed by Mozambique with $2.7bn and the
ESG, public money is still being used to increase United States with $2bn. Within the downstream
fossil fuel production and CO2 emissions in the segment, 31% has been committed to oil refining
shape of oil and gas. and petrochemical projects, of which 79% was
South Korea’s backing of oil and gas projects deployed to Middle East and Central Asia.
are a de facto subsidy to fossil fuels and increases In terms of the biggest host country, Kuwait
transition risk for domestic industries and ranked first with funds of $7.6bn, followed by
stranded asset risk for financial institutions, the Saudi Arabia ($4.3bn) and Uzbekistan ($3.7bn)
report found. respectively.
The government of South Korea, one of the The support for fossil fuels abroad contrasts
world’s top three international coal financiers, with stasis at home. South Korea’s Samcheok
along with China and Japan, pledged to end Blue Power Plant, the country’s last coal-to-
overseas coal finance at the US Leaders Summit power project under development, could hit
on Climate in April 2021. financial trouble as green activists call on the
The South Korean government pledged in government to force the project’s financiers to
October 2020 to aim for a net-zero economy by withdraw funding.
2050. The country produced 28.1% of its elec- The most notable beneficiaries in the indus-
tricity using coal in 2020, according to data from trial sector are major South Korean shipbuilders,
the Energy Ministry. including Daewoo Shipbuilding & Marine Engi-
“The figures are shocking. South Korea has neering, Samsung Heavy Industries and Hyun-
long been criticised as a ‘climate villain’ for pro- dai Heavy Industries.
viding massive support to overseas coal power Nearly half (46%) of all Korea’s oil and gas
projects, but the country’s newly revealed public public finance, which is about $57.7bn, has
finance to overseas oil and gas completely dwarfs been invested in shipbuilding and offshore plant
its backing of coal,” Sejong Youn, climate finance financing.Of the $57.7bn, $41bn (71%) was pro-
programme director at SFOC and lead author of vided for transportation vessels, of which LNG
the report said. carriers received the most, with $23.1bn. As of
SFOC found that South Korean public finan- 2018, Korea’s shipbuilding industry is the world’s
ciers had supported both state-owned enter- largest, with a global market share of 44.2%.
prises (SOEs) and private sector companies for The findings are particularly troublesome
oil and gas projects abroad in the form of loans given that oil and gas constitute nearly half of
and guarantees. global CO2 emissions, and amid warnings from
Dongjae Oh, a researcher at SFOC and co-au- the International Energy Agency (IEA) call-
thor of the report, said: “Further investments in ing for no new investments in fossil fuel infra-
oil and gas projects go against the public’s inter- structure to achieve global carbon neutrality by
est by contributing to climate disasters and [are] 2050.™
a direct contradiction to the country’s carbon

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