The government is studying ways to introduce a carbon tax and other strong measures to reduce carbon emissions as part of a long-term fight against climate change, a high-ranking government official said yesterday.
"The government is reviewing all options, including a carbon tax, as the country aims to reduce greenhouse gases by 4 percent by 2020 compared to the 2005 level," Yoon Young-sun, a deputy finance minister in charge of tax & customs, told The Korea Herald.
"We haven`t decided yet whether to introduce it or not. We`re in a reviewing stage, and we haven`t set a time frame."
Yoon said the carbon tax scheme is being reviewed not only by the Finance Ministry but by all other related ministries and the presidential office of Cheong Wa Dae. Also considered are measures like the planned introduction of the emissions trading scheme and energy rates.
The Ministry of Knowledge Economy is currently pushing to start the pilot emissions trading scheme as early as late 2010 and operate the pilot program for three years with 641 public and private organizations. It also plans to tie local gas rates with international oil prices from March and doing the same with electricity rates next year.
A carbon tax refers to taxing fossil fuels for emissions of greenhouse gases from petroleum and coal use.
Several European countries including Sweden, Denmark, the Netherlands and Norway have adopted the carbon tax scheme but many nations including the United States and China remain hesitant to follow suit due to their heavy industrial reliance on fossil fuels.
The Korean government has recently asked the state-run think tank Korea Institute of Public Finance to study whether to introduce a carbon tax, how to apply it to the industry and how the scheme would affect the overall taxation system.
Kim Seung-rae, a research fellow at the KIPF, said in a report that imposing a tax on carbon emissions can not only minimize carbon cut costs and encourage companies to advance their technologies to further reduce carbon emissions, but also help the government increase tax revenue.
"To implement a carbon tax realistically, there are many challenges to address, like setting a detailed tax rate, linking it with the emissions trading scheme, tackling the income redistribution issue and reaching a political agreement," Kim said.
"Despite the challenges, advanced nations are paying higher attention on a carbon tax rather than sticking to existing measures of direct regulation."
Kim calculated that, assuming Korea had imposed a carbon tax on nine energy sources including fuel and gas in 2007, the government would have collected 9.1 trillion won ($7.9 billion) tax revenue that year, on the condition that the tax rate was 31,828 won (25 euros) per ton of CO2 as set by independent U.K. greenhouse gas tracker Cambridge Econometrics.
He noted that as Korea has already reduced income tax and corporate tax rates under the Lee Myung-bak administration, the government should be careful in deciding whether to offer an additional cut in direct tax, which could be given in return for a carbon tax.
Joe Gyu-soo, manager of the carbon management team at the environmental labeling body Korea Environmental Industry Technology Institute, said he expects that the government will impose a carbon tax based on the amount of carbon emissions.
The institute started labeling the amount of carbon dioxide emitted during an entire lifecycle of a product in April last year and a total of 37 companies have had their 225 products labeled so far, according to Joe.
"Products of steelmakers and chemicals firms emit relatively larger amounts of carbon," he said.
In the industrial sector, POSCO, which is responsible for 10 percent of Korea`s CO2 emissions, said on Feb. 3 it would voluntarily cut CO2 by 9 percent by 2020 from the 2007-2009 average level.
By Kim Yoon-mi