In the recent 22nd National Assembly election in South Korea, addressing the climate crisis emerged as a prominent promise among most political parties. Survey results revealed that approximately 33% of voters considered climate policies as a decisive factor in their voting choices.
As the newly inaugurated national assembly takes office, it is expected to prioritize common pledges, including the expansion of the country’s Climate Change Fund and the augmentation of the Emissions Trading Scheme through auctioning.
One urgent agenda on the assembly’s docket is the rationalization of power tariffs, which have been frozen since mid-2023 until the second quarter of 2024. The combination of low-regulated power tariffs and high costs of imported fossil fuels has contributed significantly to the mounting debt of the state-run power utility, Korea Electric Power Corporation (KEPCO), reaching an unprecedented ₩202.5 trillion (US$146.6 billion) in 2023.
A recent report by the Institute for Energy Economics and Financial Analysis (IEEFA) identified fossil fuel-centric energy security and a non-competitive power market structure as the root causes of KEPCO’s financial challenges.
Despite concerns about KEPCO’s debt, the government revised the KEPCO Act in December 2023, raising the company’s bond issuance limit, which has raised concerns about potential “double moral hazard.”
The reliance on bond issuance to address financial challenges highlights the importance of rationalizing the power tariff system in South Korea to break free from fossil fuel dependence and ensure sustainable development.
The delayed energy transition in South Korea has resulted in high energy bills and missed opportunities for cost reduction. Pledges by political parties to triple renewable energy by 2030 and enact the Korean Inflation Reduction Act are seen as positive steps, but tangible policymaking is essential for these commitments to materialize.
With renewable energy expected to achieve grid parity by 2027, addressing South Korea’s power trilemma of energy security, market competitiveness, and sustainable development is crucial to mitigate energy costs and break free from dependence on imported fossil fuels.