South Korea's public finance has invested significantly more in fossil fuels compared to renewable energy, raising concerns amid ongoing global energy supply disruptions.
Recent geopolitical tensions, including the U.S. invasion of Iran leading to the blockade of the Strait of Hormuz, have highlighted the vulnerabilities in global oil supply chains. Approximately 20% of the world's oil sea transport passes through this strait, with South Korea dependent on the Middle East for 70% of its oil and 20% of its liquefied natural gas (LNG). The resulting spikes in international oil prices, exchange rates, and shipping rates have prompted calls for South Korea's Export-Import Bank and Trade Insurance Corporation to shift focus from fossil fuel investments to renewable energy support. Over the past decade, South Korea's public finance has directed more than thirteen times the funds towards fossil fuels compared to renewables.
On October 10, the climate advocacy group Climate Solution released an 'issue brief' urging against the continued use of natural gas as a 'bridge' to carbon neutrality. Although some argue that natural gas, being less polluting than coal, can serve as a transitional energy source until renewable energy is more prevalent, the repeated supply chain shocks illustrate its instability. The ongoing crises, such as the 2022 Russia-Ukraine conflict and subsequent Saudi Arabian Houthi attacks, have heightened market volatility, leading to increased electricity and gas charges for consumers in South Korea, alongside the rising debts faced by Korea Electric Power Corporation.
European nations have turned these crises into opportunities for structural transformation following the gas crisis triggered by the Russia-Ukraine war. From 2022, Europe's dependency on Russian gas plummeted from 45% to 19%, alongside a 17% reduction in gas consumption and a notable 58% increase in renewable energy usage. Climate Solution reported that Europe managed to safeguard 168 trillion won in fossil fuel import costs through energy diversification and an expansion of renewables. In light of these developments, the group recommends realigning South Korea's public finance strategies to enhance national industry competitiveness and energy independence.
