Benchmarking SME decarbonisation policies ‑ Country notes: Korea
Table of contents
This country note highlights recent decarbonisation trends in Korea, examines information on the environmental footprint of Korean SMEs, and outlines main government policies for SME decarbonisation. Korean SMEs are central to decarbonising the Korean economy, particularly in energy-intensive manufacturing sectors with a high share of SME emissions, such as textiles (78%) and automotive (39%). Most SMEs recognise the importance of the green transition, but few have implemented strategic plans and actions towards carbon neutrality. To address this gap, the government has established a range of support instruments. These include investment support programmes for energy-efficient equipment, as well as green loans linked to credit guarantee schemes, where Korea plays a leading role in integrating GHG emissions performance criteria into the design of green finance products for SMEs. In parallel, various public bodies assist SMEs in measuring emissions, including through simplified tools available on the SME Climate Response Platform, particularly for firms not covered by mandatory reporting under the Korea Emissions Trading Scheme (K-ETS).
The Korean economy relies heavily on imported fossil fuels to meet its energy demands. This reflects the country’s limited domestic fossil fuel resources and means it is a net importer of embodied carbon in final consumption (OECD, 2025[1]). Production-based GHG (per capita) emissions increased steadily until around 2018. Since 2018, they started to decline, while remaining above the OECD average. Nevertheless, Korea has achieved a relative decoupling of carbon emissions from real GDP growth since the early 2000s (Figure 1, Panel A). The country’s energy mix remains highly dependent on fossil fuels, with renewables accounting for less than 3% of total primary energy supply. A similarly fossil-fuel-intensive pattern is observed in the electricity generation sector.1 The largest sources of GHG emissions in Korea are the energy industry and manufacturing, which together account for more than half of total emissions. These are followed by the transport sector, while buildings, waste, agriculture and other sectors contribute comparatively smaller shares (Figure 1, Panel B).
Source: OECD (2025) Environment at a Glance: Korea, https://www.oecd.org/en/publications/environment-at-a-glance-country-notes_59ce6fe6-en/korea_acc98282-en.html (Panel A and B).;
SMEs account for a substantial share of GHG emissions in Korea. According to the latest available statistics of the Korea Energy Agency (KEA), in 2023, SMEs accounted for around 8.8% of energy consumption and 14.3% of GHG emissions in the industrial sectors (manufacturing and mining).2 Korea’s major GHG-intensive industries such as steel, cement, petrochemicals and power generation are dominated by a small number of large enterprises. Therefore, large firms account for the major share of national emissions. This pattern is reflected in the design of Korea’s Emissions Trading Scheme (K-ETS), which regulates 816 major emitting facilities that together covered approximately 79% of national GHG emissions in 2022.3
Nonetheless, there are some energy-intensive manufacturing sectors with a high share of SME GHG emissions, such as textile manufacturing (78%) and the automotive industry (39%) (Figure 2). Additionally, food and beverage (34%) and pulp and paper (30%) industries display balanced shares of GHG emissions, and mark sectors with particularly high GHG emission shares among mid-sized firms (41% and 65% respectively). Similarly, with 79%, mid-sized firms in the non-metallic minerals sector (glass, ceramics) are responsible for the large majority of emissions in this sub-sector.
Note: The survey builds on the sample of over 211 000 companies/ establishments, SMEs accounted for around 204 000 establishments, mid-sized firms for 4 000 establishments, large firms for 1 300 establishments, and ‘other’ for 1500 establishments.
Firms size is defined following financial and legal criteria. Either firms have a certificate/ notification defining their legal status or are classified following these financial thresholds: Large firms are firms with assets of KRW 10 trillion (around USD 6.62 billion) or more; mid-sized enterprises have an average annual sales exceeding the medium-sized enterprise benchmark for their sector or assets of KRW 500 billion (USD 331.13 million) or more; small and medium-sized enterprises have an average industry-specific sales below the mid-sized enterprise threshold and total assets below KRW 500 billion (USD 331.13 million). ‘Other’ refer to public institutions (public corporations, associations, co-operatives, etc.).
Source: Based on Korea Energy Agency (2024), Energy and GHG Emission Statistics 2023, https://www.energy.or.kr/front/board/View9.do .
These differences between industries indicate that decarbonisation strategies need to align closely with Korea’s sector-specific firm-size structure and emission profiles. Moreover, despite SMEs’ smaller overall share in national emissions, it is often noted that SMEs tend to be less energy-efficient and show higher emissions intensity per unit of value added than large firms, reflecting scale constraints, older capital stock, and limited access to energy-efficient technologies (IEA, 2023[2]).
Industrial GHG emissions among SMEs also vary significantly depending on regional industrial composition.4 In regions such as Ulsan, Jeonnam, Chungnam, and Gyeongbuk, home to concentrated clusters of refining, petrochemicals, and steel, large enterprises account for 80 to 95% of industrial emissions, while SMEs account for only a marginal share. In contrast, regions such as Gwangju, Daegu, Gyeongnam, and Jeonbuk host fewer large heavy-industry complexes but a wide distribution of SME manufacturers in machinery, parts, and food processing, resulting in substantially higher SME emission shares. Gyeonggi Province and Busan show a more balanced pattern, with both large industrial facilities and dispersed SME manufacturing, leading to a more even distribution of emissions across firm sizes.
A 2021 survey conducted by the Korea SMEs and Startups Agency (KOSME) examined the state of SMEs’ preparedness for carbon-neutrality among 319 SMEs (KOSME, 2021[3]). While around 81% of respondents recognised the need for carbon-neutral measures in response to climate change, only around 4% considered such measures unnecessary, indicating a high overall awareness of the issue (Figure 3, Panel A). However, this recognition did not yet translate into action. More than half of SMEs (56%) reported having no plans to prepare for carbon neutrality, 29% indicated that they intended to prepare, and only 15% stated that they were already prepared or in the process of preparing (Figure 3, Panel B). This highlights a considerable gap between perceived necessity and actual implementation.
Panel A. SME perceptions of the need for carbon neutrality | Panel B. SME plans for carbon neutrality
Source: KOSME (2021[3]), SME Trends in Carbon Neutrality Responses: Results and Policy Implications, Issue Focus No. 2, https://www.kosmes.or.kr/nsh/SH/IFS/SHIFS016F0.do?seqNo=704&nowPage=5&searchC=&searchG=&searchT= .
Among SMEs that reported being prepared or in the process of preparing, the most common response regarding carbon-neutrality measures was the “commercialisation of low-carbon and eco-friendly technologies or products” (43%). This was followed by “improvement of processes and installation of low-carbon and eco-friendly equipment” (29%), “business transition towards alternative or promising sectors” (16%), and “substitution of carbon-intensive raw materials with low- or zero-carbon alternatives” (9.8%). These results suggest that many SMEs prioritise more strategic and outward-oriented approaches, such as new technologies, products, or business transitions, over internal efficiency measures such as process optimisation and equipment upgrades.
Sectoral differences are also pronounced. In carbon-intensive industries such as chemicals and metals, the most frequently selected measure was “improvement of low-carbon” and “eco-friendly processes and equipment” (57% and 43%, respectively). In contrast, for SMEs in textiles, wholesale and retail distribution, and information processing (ICT and information services), the most frequently selected measure was “business transition towards alternative or promising sectors,” accounting for 33%, 40%, and 67% of respondents within each respective sector, based on the sector-specific survey subsample. This underscores the heterogeneity of transition strategies depending on industrial characteristics.
Following the survey, cost of financing green measures was the main barrier to a low-carbon transition (Figure 4). The burden of costs associated with process improvement and equipment installation was reported by 44% of SMEs, followed by “lack of information for business transition” (19%), “shortage of specialised personnel” (18%), and “difficulties in technology development” (16%). Despite these challenges, 76% of respondents indicated that they would be willing to implement low-carbon process improvements or equipment upgrades if government support programmes were available.
Source: KOSME (2021[3]), SME Trends in Carbon Neutrality Responses: Results and Policy Implications, Issue Focus No. 2, https://www.kosmes.or.kr/nsh/SH/IFS/SHIFS016F0.do?seqNo=704&nowPage=5&searchC=&searchG=&searchT= .
Regarding the types of government support needed to facilitate the transition, SMEs most frequently cited “public financing for low-carbon and eco-friendly projects” (35%) (Figure 5). This was followed by “R&D support for technology development” (17%), “support for training specialised personnel” (12%), “support for business transition towards low-carbon and eco-friendly sectors” (11%), “support for emission reduction through process improvement” (10%), “market access and marketing support” (8%), and “diagnostic and consulting services” (8%). These findings indicate that effective SME decarbonisation in Korea will require integrated and tailored support across financing, technology, human resources, and advisory services.
Source: KOSME (2021[3]), SME Trends in Carbon Neutrality Responses: Results and Policy Implications, Issue Focus No. 2, https://www.kosmes.or.kr/nsh/SH/IFS/SHIFS016F0.do?seqNo=704&nowPage=5&searchC=&searchG=&searchT= .
Korea has established a national climate governance framework since announcing its “Low Carbon, Green Growth” vision in 2008 and enacting “the Framework Act on Carbon, Green Growth” in 2009. In line with the Paris Agreement, in 2020, Korea declared a national goal of achieving carbon neutrality by 2050, thereby broadening the scope and ambition of its mitigation policies.5 These commitments were formalised through the 2021 Framework Act on Carbon Neutrality and Green Growth”, under which the government adopted the “First Basic Plan for Low Carbon, Green Growth (2023-2042). The plan outlines sector-wide mitigation pathways, investment strategies, technology roadmaps and just transition measures.
Within this framework, Korea’s core mitigation instruments remain primarily targeted at large emitters in energy-intensive sectors. This means that most regulatory obligations fall on major corporations rather than SMEs. The Korea Emissions Trading Scheme (K-ETS) (Box 1) and the Target Management System (TMS) apply only to facilities above specified emission thresholds, and most SMEs are therefore not directly covered.
The TMS requires designated large energy-consuming and emitting facilities to meet government-set annual targets for GHG emissions and energy intensity, supported by mandatory reporting and performance monitoring. Although the TMS does not impose binding obligations on smaller firms below the thresholds, the government recognises that SMEs face increasing transition pressures despite lacking formal reduction obligations. Korea’s enhanced 2030 NDCs raises economy-wide mitigation ambition, particularly in power generation, industry and buildings, thereby increasing decarbonisation requirements for large firms that are increasingly transmitted to SME suppliers through supply-chain requests for emissions data, reduction efforts and compliance with buyer-specific climate targets. In addition, emerging international mechanisms such as the EU Carbon Border Adjustment Mechanism (CBAM), indirectly affect export-oriented SMEs by requiring emissions-related information from upstream suppliers.
Recent policy reviews and the national basic plan identify SMEs’ capability gaps, financial constraints and information deficits as structural risks and accordingly establish a dedicated policy pillar for SMEs, including subsidies for low-carbon equipment investment, GHG emission and energy diagnostics, consulting support, capacity-building for emissions measurement and reporting, and assistance with ESG and climate-related disclosure.
Since its launch in 2015, the Korea Emissions Trading Scheme (K-ETS) has operated across four phases. The system has expanded its coverage over time, accounting for about 87% of national GHG emissions in 2023, with more than 800 participating entities across eight sectors, including power generation, industry, buildings, transport, shipping, waste management, and domestic aviation. Participation is limited to facilities emitting over 125 000 tCO₂e annually at the entity level (or 25 000 tCO₂e at the installation level), and allowances are distributed through a mix of free allocation and auctioning. Revenues from allowance auctions are directed to climate response funds and reinvested in decarbonisation projects, including low-carbon technology, industrial transition infrastructure and SME support programmes.
Early evaluations of the K-ETS indicate that while the scheme has contributed to stabilising national emissions since 2018, low allowance prices and previous over-allocation have constrained mitigation incentives. Recent reforms under the Phase IV basic plan aim to increase the carbon price signal and reinvest auction revenues into industrial transition and SME support, highlighting the growing importance of these complementary SME-focused decarbonisation instruments.
Related SME decarbonisation support
Although the K-ETS is Korea’s central carbon pricing instrument, most SMEs fall outside the scheme because inclusion thresholds restrict compliance obligations to large, energy-intensive facilities. As a result, SMEs are not directly regulated by the cap-and-trade system. Indirect effects arise primarily through regulated large firms such as power generators and energy-intensive manufacturers which face compliance obligations under the K-ETS and increasingly require emissions data and decarbonisation efforts from their suppliers as part of internal mitigation strategies and supply-chain management.
The government introduced complementary measures to narrow the capability gap between regulated large emitters and non-regulated SMEs. These measures are financed through a combination of budgetary resources, including revenues from K-ETS allowance auctions channelled to climate response funds, alongside general fiscal allocations. Financed measures include the Ministry of SMEs and Startups’ (MSS) SME Carbon Neutral Transition Support Programme (for non-ETS and non-TMS SMEs) which provides free or subsidised energy and GHG diagnostics, typically delivered through on-site audits, transition planning, and subsidised investment in low-carbon equipment. Another financed programme is the MSS’ partnership with the “ASEM SME Eco-Innovation Center” offering consulting and training on emissions measurement, data management and reporting, particularly in response to emerging international requirements such as the EU CBAM.
In Korea, GHG emissions monitoring for SMEs is delivered through a fragmented institutional landscape involving several government bodies. Key actors include the Greenhouse Gas Inventory and Research Centre of Korea (GIR) under the Ministry of Environment, the SME Climate Response Platform operated by the Ministry of SMEs and Startups (MSS) and the Korea SMEs and Startups Agency (KOSME), and energy audit–based monitoring programmes implemented by the Korea Energy Agency under the Ministry of Trade, Industry and Energy (MOTIE). Despite the contribution of a variety of national institutions, KOSME survey evidence from 2021 shows that so far only 15% have measured their emissions or developed a reduction plan (KOSME, 2021[3]). 81% of SMEs acknowledge the need for a transition to carbon neutrality. The most frequently cited barriers to monitoring emissions are a lack of internal expertise and technical capacity (~30%) and the cost burden of measurement and verification (~25%). This shows the need to make monitoring tools more accessible and provide technical guidance to SMEs.
Greenhouse gas inventory and research centre (GIR)
The Greenhouse Gas Inventory and Research Centre (GIR) oversees legally mandated GHG monitoring, reporting, and verification (MRV) for entities covered by Korea’s Emissions Trading Scheme (K-ETS) and the Target Management System (TMS). Since 2015, GIR has published the “GHG Inventory Guidelines for SMEs”, which were updated in 2022 to simplify emissions estimation and reporting procedures for small establishments. The guidelines primarily cover Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity), while Scope 3 remains voluntary for SMEs. Companies can calculate their emissions by entering data on electricity use, fuel consumption, and process activity and generate a self-diagnosis report following the templates provided. However, only a very small share of SMEs falls under the mandatory MRV regime: SMEs represent just 0.6% of firms participating in K-ETS, showing the dominance of large emitters in the system.
MSS/KOSME’s SME climate response platform
To support non-regulated SMEs, MSS and KOSME launched the “SME Climate Response Platform” in 2023. This platform provides SMEs with a simplified, web-based GHG calculator that estimates emissions using monthly energy consumption data (e.g. electricity and fuel use), without requiring on-site measurement devices or specialised MRV systems. As of 2024, approximately 2 000 SMEs have used the calculator on a voluntary basis, with electricity identified as their main emissions source (99%).
Fewer than 10% of participating SMEs have measured any category of Scope 3 emissions, confirming that monitoring of supply chain emissions largely remains at an early stage. To address the increasing need for measurement of SMEs’ GHG emissions, the government plans to introduce an “SME GHG Verification Consulting Programme” in 2025. The programme is expected to support SMEs in verifying Scope 1 and Scope 2 emissions data as a first priority, while also providing initial methodological guidance on selected Scope 3 categories where data availability allows. External experts will be funded to conduct data quality checks, improve inventory consistency, and assist SMEs in setting realistic emission-reduction targets.6
Energy audits and GHG emission monitoring under the Korea Energy Agency
The Korea Energy Agency (KEA), in co-operation with MOTIE, conducts industrial energy audits that directly target SMEs.7 These audits, indirectly support GHG monitoring in the sense that GHG emissions are estimated from audited energy consumption data rather than measured through a formal MRV system. Through this process, KEA assesses energy consumption patterns, process efficiencies, and equipment performance and converts these findings into estimated GHG emissions linked to Scope 1 and 2 sources. The energy audit system provides SMEs with practical insights into emission drivers and reduction opportunities and remains one of the most widely used diagnostic tools among manufacturing SMEs.
Emerging Guidance on measurement and reduction of Scope 3 emissions
Recognising the rising importance of GHG emissions in the value chain, the Ministry of Environment and Greenhous Gas Inventory and Research Centre of Korea (GIR) have announced plans to publish a national “Scope 3 Accounting Guideline” in 2025. The guideline is intended to align with the GHG Protocol and to provide simplified methodological guideline for SMEs, focusing on priority categories such as purchases goods and services and upstream logistics, where data availability is limited (MOE/GIR, n.d.[5]).8
Energy-efficiency and energy-management training (Korea Energy Agency, MOTIE)
The Korea Energy Agency (KEA) operates several professional training programmes to strengthen SME capacity in energy management and decarbonisation in business operations. These include the Energy Auditor Training Course and the SME Energy Manager Programme, both accessible to SME employees. KEA reports that more than 700 participants completed energy-related professional training in 2024, with SME workers accounting for roughly 40% of trainees.
Additionally, since 2023, KEA and the Ministry of Trade, Industry and Energy (MOTIE) have jointly implemented the “Industrial Energy Efficiency Innovation Academy” that offers technical training on energy audits, high-efficiency equipment, and data-based monitoring
Private-sector and business association training (KBIZ, KCCI)
Business associations play a complementary role in expanding SME-oriented awareness and training opportunities. The Korea Federation of SMEs (KBIZ) and the Korea Chamber of Commerce and Industry (KCCI) deliver online ESG and carbon-neutrality training programmes, which recorded over 6 000 cumulative enrolments by 2024. Approximately 70% of learners were employees from SME manufacturing firms. Curricula focus on practical, low-cost mitigation options suitable for SMEs, such as energy-operation optimisation, low-carbon procurement practices, and supplier engagement strategies.
Local government and regional governance programmes
Local governments and regional innovation agencies also provide awareness-building initiatives for SMEs. Cities such as Incheon and Gyeonggi Province, along with organisations like Ulsan Technopark, regularly host carbon-neutrality briefings, sector-specific workshops, and hands-on training for SMEs located in industrial clusters. Survey evidence from the city of Incheon indicates that 49% of SMEs have participated in at least one carbon-neutrality briefing, with the strongest demand for training in process-efficiency improvement (36%) and carbon-accounting skills (28%) (Incheon Institute, 2024[6]). These regional programmes often operate alongside national KOSME-supported schemes to ensure continuity between federal support and local capacity-building.
SME Carbon Neutrality Equipment Investment Programme (KOSME/MSS)
The SME Carbon Neutrality Equipment Investment Support Programme is an investment support scheme designed to reduce GHG emissions and strengthen SMEs’ capacity to respond to carbon-related regulations by promoting the adoption of energy-efficient and low-carbon equipment. The programme combines advisory support, including consultations, with financial assistance for equipment installation. Following selection for the programme, firms are eligible for subsidies covering equipment investment costs, including the purchase of energy- and emissions-reduction equipment, construction works, and commissioning costs.
The programme targets SMEs for which the low-carbon transformation of operations is particularly urgent. Support is provided with a maximum subsidy of up to KRW 300 million (USD 199 0009) per firm, with the government subsidy rate capped at 70%. Depending on the type of investment, subsidy rates typically range between 50% and 70%. As of 2026, the programme operates with a total budget of approximately KRW 19.1 billion (USD 12.6 million).
Carbon-Neutral Equipment Support for K-ETS Firms (MOE/KECO)
Since 2017, the Ministry of Environment and the Korea Environment Corporation have operated annual funding rounds to support programme providing subsidies for the installation and replacement of GHG-reducing facilities in K-ETS-covered establishments. The programme consists of two components. First, the Greenhouse Gas Reduction Equipment Support Scheme provides subsidies for the installation or replacement of emissions-reduction equipment at K-ETS compliance entities. Eligible beneficiaries include SMEs, large enterprises, public institutions, schools, and hospitals, with differentiated subsidy rates (70% for SMEs versus 30% for large enterprises).
Secondly, the ETS Compliance Co-operation Programme is designed for K-ETS entities (main operators) with limited internal abatement capacity. Under this scheme, a main operator may implement emissions-reduction projects at the facilities of partner SMEs (sub-operators) and count the resulting emissions reductions toward its own compliance obligations, including through allowance transfers. In this case, 50% of the investment costs for emissions-reduction equipment are subsidised for the main operator. Eligible equipment includes zero-emission equipment, waste-heat recovery and utilisation systems, and carbon capture equipment for process improvements, as well as inverters and other high-efficiency devices for electricity and fuel savings. The scope of support covers not only equipment purchase costs but also auxiliary and metering equipment, design costs, installation works, supervision, and commissioning.
Clean Production Support Programme (MOTIE/KNCPC)
Under the Clean Production Support Programme, MOTIE and the Korea National Cleaner Production Centre (KNCPC) operate long-standing clean-production support schemes that provide consulting and partial financial support for process optimisation (see more details in Box 2).
Industrial Supply Chain Carbon Partnership Programme
The Industrial Supply Chain Carbon Partnership Programme aims to strengthen exporters’ capacity to respond to global carbon regulations and enhance industrial competitiveness by supporting GHG emissions reduction at the supply-chain level. The programme is implemented through supply-chain consortia led by large or mid-sized firms, while SMEs participate as partner companies. Lead firms form consortia and work with the government to support emissions-reduction activities among partner firms, which are responsible for adopting emissions-reduction equipment at their facilities and providing carbon-related data. The programme supports the costs of introducing technologies, equipment, and facilities aimed at reducing both direct and indirect emissions at partner firms’ sites. To ensure the credibility of mitigation outcomes, the programme also covers consulting costs for site-level emissions-reduction performance verification and calculation and verification of product carbon footprints.
As of 2026, the programme operates with a total budget of KRW 10.5 billion (approximately USD 6.95 million), with support of up to KRW 5 billion (USD 3.31 million) per consortium. Subsidy rates are differentiated by firm size, set at 60% for SMEs and 50% for mid-sized firms. The programme focuses on enhancing carbon management and regulatory compliance capabilities across entire supply chains, rather than on emissions reductions at the level of individual firms alone.
Eco-Industrial Development Circular Network Facilities
The aim of the Eco-Industrial Development Circular Network Facilities programme is to foster a circular economy-based industrial ecosystem and contribute to national GHG mitigation by promoting the circular use of by-products and energy generated in industrial processes. The programme targets industry supply chain–based consortia, with the requirement that at least one participating firm must be located within an industrial complex. Eligible projects focus on the construction of circular networks that convert process by-products, unused heat, and waste resources into secondary materials or energy sources. Support covers not only resource recovery and recycling facilities but also supply-chain-level GHG management infrastructure, such as measurement, control, and monitoring systems. In addition, the programme supports emissions-reduction quantification and third-party verification, as well as product carbon footprint assessment, thereby strengthening firms’ capacity to respond to global environmental regulations.
As of 2026, the programme provides total support of KRW 4.15 billion (approximately USD 2.75 million), with national subsidies covering up to 70% of eligible costs. Beyond physical infrastructure investment, the programme plays an important role in promoting demonstration, verification, and the commercial viability of circular economy-based solutions.
Green Finance: Climate Response Special Guarantees (KODIT/KOTEC)
Korea’s major credit guarantee institutions, the Korea Technology Finance Corporation (KOTEC) and the Korea Credit Guarantee Fund (KODIT) have introduced dedicated climate-response guarantee schemes that provide preferential credit support for firms investing in low-carbon technologies. Key instruments include KOTEC’s Carbon Value-Based Guarantee Programme and Taxonomy-Aligned Guarantee Programme, as well as KODIT’s Carbon-Free Energy Guarantee.
Carbon Value-Based and Taxonomy-Aligned Guarantee Programmes (KOTEC)
The Korea Technology Finance Corporation (KOTEC) operates specialised guarantee schemes to support green entrepreneurial activities. The Carbon Value-Based Guarantee Programme provides guarantees amounting to approximately USD 318 million (KRW 480 billion), while the Taxonomy-Aligned Guarantee Programme operates at a scale of around USD 185 million (KRW 280 billion).
Carbon Value-based Guarantee Programme
Under the programme, firms are assessed based on their realised or expected GHG reductions, which are monetised and reflected in guarantee terms. To this end, the KOTEC applies an advanced proprietary valuation framework that translates the mitigation potential into monetary value. The beneficiaries of the programme include firms commercialising green products and services, firms undertaking emissions-reduction projects through measures such as facility upgrades, and manufacturing firms in the renewable energy industry.
The programme offers various benefits to eligible firms. Specifically, the monetary value of the GHG reductions is added to the appropriate guarantee limit based on the firm’s financial status. In addition, guarantee coverage ratios are expanded up to 90% or 95%, while guarantee fees are reduced by 0.2 to 0.4 percentage points depending on emissions-reduction performance. If a loan is processed at a partner bank, an additional 0.7 percentage points guarantee-fee subsidy is available for up to two years.
Taxonomy-Aligned Guarantee Programme
The Taxonomy-Aligned Guarantee Programme supports firms whose economic activities comply with K-Taxonomy. Using Climate Technology Rating System (CTRS) and the KIBO Taxonomy application for SMEs, the programme verifies taxonomy alignment and provides guarantee support of up to KRW 3 billion (approximately 2 million) for working capital or KRW 10 billion (approximately 6.6 million) for facility investment related to green economic activities. The programme offers various benefits, and if the loan is processed through a partner bank. An additional 0.7 percentage points guarantee-fee subsidy is available for up to two years.
Carbon-Free Energy Guarantee (KODIT)
The Carbon-Free Energy Guarantee programme is designed to promote the deployment of carbon-free energy and foster related industries by providing credit guarantees for liabilities incurred by firms engaged in renewable energy, nuclear power, and other carbon-free energy activities. Operated by the Credit Guarantee Fund of Korea, the programme operates at a scale of approximately USD 83 million (KRW 125 billion), as of 2025.
The programme differentiates support through two guarantee tracks. The Clean Tech Specialised Guarantee targets firms that manufacture products classified as clean tech or possess related technologies, providing guarantee support for working capital and facilities investment required for business expansion in the clean tech sector. The Carbon-Free Project Guarantee is designed for power producers undertaking carbon-free energy projects and provides guarantees for project-based facilities financing associated with the installation of carbon-free energy generation facilities intended for energy supply, sale, or self-consumption.
Under the programme, guarantee conditions vary by track. Clean tech guarantees apply to both facilities and working capital loans, with guarantee fee reductions of 0.3 percentage points and coverage ratios ranging from 90% to 100%. Carbon-free project guarantees apply to facilities financing only, with a fixed guarantee fee of 0.5% and coverage ratios of 95% to 100%. Guarantee limits are set at up to USD 6.6 million (KRW 10 billion) for SMEs under the clean tech track and USD 13.2 million (KRW 20 billion) for mid-sized firms under the carbon-free project track.
SME-focused R&D and Innovation Programmes for Climate Action
Carbon Reduction R&D for Strategic Export Products of SMEs (TIPA/MSS)
The Carbon Reduction R&D for Strategic Export Products of SMEs is a national R&D initiative designed to support SMEs in developing carbon-reduction technologies as carbon-related regulations tighten in major export markets such as the EU and the US. Managed by the Korea Technology and Information Promotion Agency for SMEs (TIPA), this new programme will launch in 2026 with an annual budget of approximately KRW 5 billion (approximately USD 3.3 million). It targets exporting SMEs and requires collaboration with demand-side companies and demonstration support organisations, while universities and public research institutes may also participate as needed. The programme is designed to cover the full innovation cycle, from R&D to demonstration and verification of carbon-reduction effects, thereby helping exporting SMEs respond to international carbon regulations through technological innovation.
SME Carbon Neutrality Commercialisation Support Programme (KOSME/MSS)
The SME Carbon Neutrality Commercialisation Support Programme aims to accelerate the market entry of carbon-neutral technologies developed by SMEs. The programme is implemented by the Korea SMEs and Startups Agency under the oversight of the Ministry of SMEs and Startups. In 2025, it supported approximately 10 firms, with a total budget of around KRW 3.0 billion (approximately USD 2.0 million) (Presidential Commission on Carbon Neutrality and Green Growth, 2025[7]). Eligible beneficiaries are SMEs that already possess carbon-neutral technologies, typically validated through public R&D programmes or demonstrated through intellectual property rights such as patents or technology transfer agreements. The programme provides funding for commercialisation-related activities, including prototype development, performance testing, certification and verification, marketing and dissemination, as well as consulting services to facilitate technology commercialisation. Depending on the specific sub-programme, individual firms receive support of up to approximately USD 130 000 to 400 000 (KRW 0.2 to 0.6 billion).10 A key feature of the programme is the inclusion of purchase-linked demonstration projects, under which SMEs are supported in validating their carbon-neutral technologies in real market conditions based on actual purchases by buying firms.
Green Process Transition Guarantee (KODIT)
Operated by the Credit Guarantee Fund of Korea, the Green Process Transition Guarantee programme prioritises financing for the adoption of emissions-reduction facilities, as well as for R&D, commercialisation, and scale-up of low-carbon products and technologies. As of 2025, the programme operates at a scale of approximately USD 477 million (KRW 720 billion).
Eligible beneficiaries are SMEs and mid-sized firms, with support differentiated according to the firms’ investment objectives. The programme is structured around three guarantee types: (1) Low-carbon Business Transition Guarantees (to restructure existing business operations toward lower-carbon models), (2) Low-carbon Technology Innovation Guarantees (for green technological innovation), and (3) Low-carbon Project Guarantees (for concrete projects such as installation of installation of renewables).
Guarantee conditions vary by guarantee type. For example, under the Low-carbon Business Transition Guarantee, guarantee fees are set at 0.5% for facilities loans, while working capital loans benefit from a fee reduction of 0.3 to 0.5 percentage points relative to standard rates. Guarantee coverage ratios range from 90% to 100%, with guarantee ceilings of up to around USD 6.6 million (KRW 10 billion) for SMEs and USD 13.2 million (KRW 20 billion) for mid-sized firms, and both facilities and working capital loans may be supported concurrently.
Financial support for green entrepreneurs
Net-zero Promising SMEs Financing Programme (KOSME/MSS)
The “Net-Zero Promising SMEs Financing Programme” is one of Korea’s main scale-up financing instruments, targeting SMEs that are commercialising green technologies or pursuing low-carbon and environmentally friendly manufacturing transitions. The programme aims to promote the diffusion of green technologies and the transition to sustainable manufacturing, thereby contributing to the development of a carbon-neutral industrial ecosystem. It is operated by the Korea SMEs and Startups Agency under the oversight of the Ministry of SMEs and Startups, with a total planned budget of approximately USD 62.1 million (KRW 93.8 billion) in 2026. Support is primarily provided in the form of long-term, low-interest loans for facilities investment and working capital, complemented by interest-rate subsidies for eligible firms.
Net-zero Promising SMEs Financing Programme (KDB/IBK)
Early-stage green start-ups in Korea are supported through preferential financial products linked to the government-led Net-Zero Challenge X selection programme. Through Korea Development Bank (KDB)’s green financial product, KDB Carbon Net-Zero, support is provided to firms investing in areas such as hydrogen and offshore wind energy facilities, as well as green innovation technology companies.
Eligible firms benefit from preferential interest rates reduced by 0.75% points below the base rate, with financing available for periods of up to 20 years. Support may take the form of facilities financing, investment, or guarantees, depending on project characteristics.
In parallel, Industrial Bank of Korea (IBK)’s Start-up Loan Programme provides preferential lending for green start-ups through working capital loans, offering interest-rate reductions of up to 1.5% points. In addition, participating firms receive guarantee fee support of 0.5% points (out of a standard 1%), applied for a period of three years. Together, these programmes target start-ups at the early commercialisation stage and aim to ease liquidity constraints and facilitate initial market entry for innovative green technologies by improving access to long-term and preferential financing.
In Korea, no legally mandatory disclosure obligations currently apply to SMEs and smaller firms. However, indirect pressures on SMEs have intensified due to strengthened supply-chain requirements from large domestic corporations and growing ESG expectations in international markets. Evidence from a national survey of major conglomerates11 shows that 87% of Korea’s top 30 large firms conduct ESG evaluations of their SME suppliers, up sharply from 57% in 2019. Approximately half of these large firms report that they already collect, or plan to collect, environmental data from their suppliers. In parallel, 69% of large firms incorporate ESG evaluation results into procurement decisions, providing incentives for high-performing suppliers and, in some cases, reducing or terminating transactions with firms that cannot meet expectations. These developments demonstrate that SMEs, while not directly regulated, are increasingly expected to measure and disclose environmental performance, particularly GHG emissions, as a condition for maintaining stable supply relationships.
Despite recognising the importance of ESG management, many Korean SMEs face difficulties in meeting these emerging expectations due to structural capacity constraints. According to a study from the Korea Institute for International Economic Policy (KIEP), 89% of SMEs report not being prepared for ESG adoption, citing limited human resources, financial burdens, and insufficient expertise (Korea Institute for International Economic Policy, 2022[8]).
Korea is also preparing to introduce its first comprehensive sustainability disclosure standards, aligned with the International Sustainability Standards Board (ISSB). The Financial Services Commission is developing the Korean Sustainability Disclosure Standards (KSDS). While mandatory application will begin with large, listed firms from 2026 and gradually expand, SMEs are expected to be affected indirectly through supply-chain demands, financial-sector requirements, and broader market expectations. As Korea transitions toward a more formalised disclosure ecosystem, dedicated SME support measures, both financial and technical, will become increasingly important to ensure that smaller firms can adapt to rising sustainability reporting requirements.
References
[2] IEA (2023), Energy Efficiency 2023, https://iea.blob.core.windows.net/assets/dfd9134f-12eb-4045-9789-9d6ab8d9fbf4/EnergyEfficiency2023.pdf.
[6] Incheon Institute (2024), Building an Education Framework to Strengthen SMEs’ Capacity for Carbon Neutrality in Incheon, https://www.ii.re.kr/base/board/read?boardManagementNo=14&boardNo=17848&menuLevel=&menuNo=&utm_source=.
[8] Korea Institute for International Economic Policy (2022), Global ESG Policy Trends and Implications for Korea - Research Report No. 22-05, https://www.kiep.go.kr/gallery.es?mid=a10103050600&bid=0001&tag=&b_list=10&act=view&list_no=10784&nPage=20&vlist_no_npage=0&keyField=&keyWord=&orderby=.
[3] KOSME (2021), SME Trends in Carbon Neutrality Responses: Results and Policy Implications, Issue Focus No. 2, https://www.kosmes.or.kr/nsh/SH/IFS/SHIFS016F0.do?seqNo=704&nowPage=5&searchC=&searchG=&searchT=.
[5] MOE/GIR (n.d.), 2024–2025 Climate and Carbon Accounting Policy Roadmap.
[4] National Climate Crisis Response Committee (2024), Korea’s Emissions Trading System Experts Answer Korea’s K-ETS and the Importance of Carbon Neutrality, https://www.pcccr.go.kr/base/board/read?boardManagementNo=67&boardNo=3555&page=&searchCategory=&searchType=&searchWord=&menuLevel=3&menuNo=.
[1] OECD (2025), Environment at a Glance: Korea, https://www.oecd.org/en/publications/environment-at-a-glance-country-notes_59ce6fe6-en/korea_acc98282-en.html.
[7] Presidential Commission on Carbon Neutrality and Green Growth (2025), Briefing Materials for the 2026 Carbon-Neutral Industrial Transition Support Programme, https://www.2050cnc.go.kr/base/board/read?boardManagementNo=56&boardNo=7203.
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← 1. Please find more energy and emission-related data on the Korea country page on the IEA website: https://www.iea.org/countries/korea
← 2. The statistics on energy consumption and GHG emissions by SMEs exclude mid-sized firms and only include SMEs according to the following definition of SMEs: SMEs (small and medium-sized enterprises) have an average industry-specific sales below mid-sized enterprise (following sector-specific benchmarks) or have assets less than KRW 500 billion (EUR 300 million). For more info and the full statistics, see: Korea Energy Agency (2024), Energy and GHG Emission Statistics 2023, https://www.energy.or.kr/front/board/View9.do
← 3. Based on International Carbon Action Partnership (2025): https://icapcarbonaction.com/en/ets/korea-emissions-trading-system-k-ets#:~:text=The Korea Emissions Trading System,2021 “Carbon Neutral Framework Act”
← 4. Based on KEA statistics (2023), https://www.energy.or.kr/front/board/View9.do?boardMngNo=9&boardNo=24148
← 5. Source: Government of Korea (2020), https://www.korea.kr/briefing/policyBriefingView.do?newsId=156425378
← 6. Based on a 2024 policy briefing on SME climate policy from the Ministry of SMEs and Startups (MSS).
← 7. Korea’s energy efficiency policy framework, including mandatory energy audits and efficiency improvement measures for industrial facilities, is established under the Energy Use Rationalization Act (Republic of Korea, as amended), administered by the Ministry of Trade, Industry and Energy (MOTIE).
← 8. Based on Ministry of Environment (MOE) and Greenhouse Gas Inventory and Research Center of Korea (GIR); as well as MOE policy briefings on Scope 3 emissions and value-chain carbon accounting.
← 9. AII KRW/USD conversions in this report are based on an exchange rate of KRW 1 510 per USD as of 3 April 2026.