South Korea mulls carbon tax

Official reveals government review is under way to assess the feasibility of a levy on carbon

BusinessGreen.com staff | BusinessGreen | 17 Feb 2010

South Korea has become the latest country to confirm it is considering imposing a carbon tax as it attempts to meet its target of cutting greenhouse gas emissions four per cent by 2020.

Yoon Young-sun, deputy finance minister in charge of tax and customs, told the Korea Herald that the government was undertaking a review of whether or not a straight tax on carbon emissions could help it meet its emissions targets.

"The government is reviewing all options, including a carbon tax, as the country aims to reduce greenhouse gases by four per cent by 2020 compared to the 2005 level," he said. "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."

The review will run alongside government plans to implement a national emissions cap-and-trade scheme, which is expected to be piloted across more than 640 public and private bodies from later this year.

The Korean government has already secured plaudits from environmental groups for targeting the bulk of its economic stimulus package at clean technologies, and any carbon tax would further cement its position as one of the leading low-carbon hubs in Asia.

A number of European countries, including Norway, Denmark and most recently France have developed carbon taxation schemes, however South Korea is one of the largest and most export-dependent economies to date to investigate carbon taxation.

State-run think-tank the Korea Institute of Public Finance has been asked by the government to assess the viability of a carbon tax, and research fellow Kim Seung-rae told the Herald that the early indications were that a carbon tax would help cut emissions and stimulate clean tech investment while raising much-needed revenue for the government.

"To implement a carbon tax realistically, there are many challenges to address, like setting a detailed tax rate, linking it with the emissions trading plan, tackling the income redistribution issue and reaching a political agreement," he added. "[But] despite the challenges, advanced nations are paying higher attention to a carbon tax rather than sticking to existing measures of direct regulation."

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