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South Korea’s climate goals mean a restructuring of its economy

November 13, 2021

“IF WE MAKE IT WELL, the country is doing well, and when the country is doing well, we’re doing well, ”reads the inscription on the walls of the former Hyundai Heavy shipyard in Gunsan on the South Korean west coast. The quote from Chung Ju-yung, the late founder of Hyundai, one of the largest conglomerates in the country, is an  -t summary of South Korea’s development strategy. Equating manufacturing expertise with national interest led to the massive government-led investments in heavy industry that made South Korea rich.

Today the fading letters are an ominous sign for the future. Four years ago, the Hyundai shipyard and GM auto plant in Gunsan closed in ten months, resulting in the loss of tens of thousands of jobs. There is a risk of further such devastation in the future. The country’s industrial giants have no clear plan to eliminate greenhouse gas emissions by 2050, which the government has promised. How they do this will determine the future not only of South Korean industry but also of industrial cities.

South Korea’s coastal cities are the most visible signs of the country’s r -id industrialization. From the 1960s onwards, sleepy fishing ports and trading posts were transformed into sprawling industrial centers with shipyards, car factories, steelworks, oil refineries and container terminals. Industry generates 37% of GDP, compared to the rich countries average of 27% and more than 80% of exports. The per c -ita GDP in Ulsan, the most important industrial city, is 75% above the national average. At a museum in town, wander through model versions of industrial plants to hear the story Ulsan wants to tell about himself. “We went from a GDP of $ 100 per person to this point,” beamed Shin Hyeong-seok, the museum’s director.

But as South Korea joins the rest of the world in curbing climate change, its heavy industrial centers are turning from growth drivers into liabilities. Their dependence on fossil fuels is one of the reasons why South Korea is the seventh largest emitter of greenhouse gases in the world. President Moon Jae-in has promised to cut emissions 40% below 2018 levels by 2030 and that South Korea will be carbon neutral by 2050, a goal that was enacted into law in August.

Environmental groups point out that Mr. Moon’s goals are still insufficient to meet South Korea’s commitments under the Paris Agreement. The government itself freely admits that it is lagging behind other rich countries in reducing emissions. But the announcement has alarmed industry representatives. They warn of production cuts and massive job losses if companies don’t get more time and support to meet their goals.

The transition to a low-carbon economy, if seriously pursued, will be the biggest challenge facing manufacturers since the transition from light to heavy industry in the 1970s, says Park Sang-in, an economist who focuses on the South Korean conglomerates at Seoul National University. The fact that South Korea comes into the game so late makes the task difficult as larger reductions now need to be made in less time.

If the government is to achieve its goals, the carbon-intensive manufacturing industries must reduce their emissions by up to 80% over the next three decades (the remaining carbon must be c -tured and stored in facilities yet to be developed). One way to achieve this would be through de-industrialization and the transition to less energy-intensive services. But given the importance of manufacturing to the economy, the consequences for workers and the industrial centers in which they live would be devastating. The only alternative is for industries to change. “We do not want to lose the role of these industries in the economic growth process, so it is important that they are transformed,” says Kang Sung-jin, who studies industrial development at Korea University in Seoul.

What will this transformation look like? Factories that make gasoline and diesel cars will have to switch to making batteries and electric vehicles. Shipbuilders need to produce carriers that run on greener fuels, and the petrochemical industry needs to provide those fuels. Steel furnaces must run on something other than coke made from coal. Electricity for industry and households, which is now mainly produced in coal-fired power plants, must come from renewable sources.

As with the change from light to heavy industry, the change will be most clearly visible in the industrial cities. For the future, the government plans to connect places like Ulsan and Gunsan to huge offshore wind farms and cover them with solar panels. Green hydrogen will power next-generation container ships and CO2-neutral steel furnaces.

Just reinvent yourself

The government’s recent plans have spurred businesses to act. However, the lack of preparation means the path to net zero is likely to be bumpy as industries are prone to shocks. Furthermore, there is no guarantee that the pledges will last through the next election. Climate change is not yet a big issue in the presidential campaign, and the next administration may not see the need to keep the conglomerates under pressure.

That means many of South Korean industrial centers might end up looking more like Gunsan, as investments in green technologies generate returns in other countries and higher emissions make some of South Korean industries obsolete. Government efforts to recruit Gunsan’s laid-off workers have been slow. Thousands have left the city.

At the site of the old colonial port, where city officials launched a number of urban regeneration projects, visitors to a large ship-sh -ed museum can relive the rice trade experience in a version of the city from the 1930s. If South Korea’s green economy doesn’t take off, the museum in Ulsan on the opposite coast could soon get a similar old-fashioned vibe.

This article  -peared in the Asia section of the print edition under the heading “Manufacturing a green revolution”

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