Korea, which has had the highest growth rate of greenhouse gas emissions in the OECD area since
1990, adopted an ambitious Green Growth Strategy in 2009. It aims at reducing emissions by 30% by 2020
relative to a “business as usual” scenario, implying a 4% cut from the 2005 level. The Strategy also
includes a Five-Year Plan with public spending of 2% of GDP per year to promote green growth. Korea is
planning to establish a carbon price through a cap-and-trade emissions trading scheme. Such an approach,
combined with a carbon tax in sectors not covered by the scheme, is necessary to reduce emissions in a
cost-effective manner and foster innovation in green technology. In addition, each sector should face the
same electricity price based on production costs to promote efficient energy use. Given market failures, the
government has a role to play in green R&D, particularly for basic research, in fostering green finance and
in developing renewable energy resources.
