South Korea and China - New Champions of Green Growth?
In the wake of the global financial crisis, South Korean President Lee Myung-bak committed his government in August 2008 to a “green growth” strategy that seeks sustainable growth by reducing greenhouse gas emissions (GHG) and environmental pollution. “It is a new development paradigm which creates new growth engines and new jobs from green technologies and clean energies”.
The principal objectives were to lay the groundwork for a low-carbon society and energy security; new engines of industrial growth; and enhanced quality of life combined with international leadership. The plan aimed to make the Republic of Korea the world’s 7th ranking green economy by 2020 and the 5th green economy by 2050. A Presidential Committee on Green Growth (PCGG) was formed as a high-level coordination committee, bringing together representatives from the principal ministries involved – including Finance, Industry and Resources.
What is distinctive about Korea’s approach to green growth is that it is an industrial strategy – in the sense that it is framed around the promotion of key technologies and industries that are viewed as providing the growth engines for the next stage of Korea’s development, and as export platforms for the 21st century, as well as a means to reducing carbon emissions. Although climate objectives are mentioned, it is predominantly an industrial upgrading strategy – and in this sense comparable with the far-reaching green development strategy that is being formulated and implemented in China.
The implications in terms of carbon reductions are real and important – but they are arguably not the driving force behind the strategy. They are instead an outcome of an industry and trade strategy focused on the new engines needed to drive the next stage of Korea’s development. This aligns Korea with China – except that Korea is starting with a more advanced technological level, and with more sophisticated international firms such as Samsung, Hyundai, LG, Doosan and SK (the country’s leading oil refiner and petrochemical producer). Both countries have clear goals of catching up with the technological leaders in green sectors.
Korea is actually a good candidate for such a far-reaching green growth strategy because (1) it is heavily dependent on fossil fuel and resource imports; (2) renewable energies accounted for only 1.4 per cent of energy inputs when the green growth choice was made; and (3) the country depends on many carbon-intensive industries such as steel, automotive, shipbuilding, petrochemical, and cement. The green growth strategy is designed to tackle each of these issues head-on.
The Korean strategy as embodied in its five-year plan for green growth – recovering a tradition of five-year plans that Korea has abandoned by in the 1990s – is focused around three key objectives, namely a transition towards a low-carbon society with energy security; the building of new “green” engines for growth, and enhanced quality of life, with international leadership.
A variety of policy instruments were set out to drive the transition to green growth:
- Public investment in infrastructure – eg, mass transit systems, improved water quality, or seed funding for a pilot project for the smart grid on Jeju Island;
- Public procurement – mandatory guidelines for public institutions;
- Public R&D in energy and low-carbon technology – where a new agency was formed (KETEP) to administer new and renewable-energy technology R&D expenditure;
- Regulation and incentives – through both Feed-in Tariffs and Renewable Portfolio Standards; sector-specific carbon emission reduction targets; more stringent vehicle GHG emission standards; tighter pollution controls, and eco-friendly tax reform, and
- Market correction measures – such as environmental taxes and pollution charges, and a proposed emissions trading scheme (yet to get through the National Assembly).
All this is backed by planned public expenditure of over 100 trillion Won (around US$100 billion) over the five years of the green growth strategy plan (equivalent to 2 per cent of GDP each year), and anticipated to grow at 10 per cent per year – investments which are designed to trigger comparable private investment from large firms (the Korean chaebol) and lift involvement of small and medium-sized enterprises in the green tech sector.
At a meeting of the PCGG held in July 2010, a year after the release of the five-year plan, the Korean corporates committed themselves to investments in green sectors amounting to 22.4 trillion Won (or around $20 billion) – not as large as anticipated, but very substantial nonetheless. All this makes it clear that the green growth strategy is as much a development and industrial strategy as a carbon emissions reduction strategy – and as such it recapitulates Korea’s earlier outstanding successes in driving industrial growth. But this time the emphasis is on sustainable, green growth.
China’s adoption of the 12th five-year plan, for 2011 to 2015, signals a new departure in the country’s industrial evolution and provides a point of contrast with Korea’s green growth strategy. The China plan sets new goals in the sense that it re-balances the economy, through increasing domestic consumption, and relaxing annual growth targets to 7 per cent; it puts more emphasis on resource efficiency and re-circulation, in the spirit of the Circular Economy Law adopted in 2008; and it identifies seven new industries for strategic promotion, with an emphasis on green technology and renewable energies. These new industrial directions are to be backed by state-guided investment, the development of technology and the setting of standards. China is investing $468 billion into green key sectors in its current five-year plan versus $211 bn. in the previous plan. By contrast, the public investment in Korea’s green growth strategy amounts to $100 billion over five years.
A far-reaching shift is evident in China’s 12th five-year plan in the form of its “internalisation” of sustainability goals and the building of a new “green” economy in the womb of the “old” fossil-fuel driven economy. This internalisation means that China is now actively creating a new pattern of growth, based on lower levels of resource intensity, greater reliance on renewable energies, an explicit commitment to the circular economy and pricing of inputs to reflect their ecological significance – just as in the case of Korea.
The emphasis on “green industry” in China’s five-year plan is complemented by an emphasis on “green cities” and “green buildings” which signal again how closely China’s evolving urbanisation is linked to the emergence of a new, “green” development and growth pattern. The 12th five-year plan brings the focus onto “seven emerging and strategic industries” which are designed to take China’s industrial development onto a new trajectory, based on innovation and indigenous technological development, earmarking them for special promotion over the next five years (following the classic East Asian development model).
No less than three of the targeted seven industries involve aspects of the green energy industrial revolution – the building of new industries producing energy-efficiency improvements, new energy sources, and new systems of transport that can be powered by renewable energy. In addition, the bio-industries to be developed will include bio-energy sources (bio mass for electric power and bio fuels) while the high-end manufacturing developments will include the “Internet of Things”, through which products will be tagged with their resource history and thereby contribute to the creation of China’s circular economy.
It is clear, then, that there is a great deal of commonality between China’s 12th five-year plan and Korea’s five-year plan for green growth, which covers the years 2009 to 2013. Indeed, it is highly likely that there was an exchange of drafts as the two documents were prepared. There is an even more significant commonality in the evident determination to implement these plans, and by doing so, change fundamentally the character of each of their economies, from earlier “brown economy” versions to something that, by 2020, promises to start looking like a genuine “green economy” alternative.
Both countries are several years from 2020, and the degree of change that can be effected in the intervening years remains a question of great debate. What can be concluded at this early stage is that neither government’s commitment to its respective green growth strategies is in doubt. The bigger question is whether the governance and institutional systems can be moved towards a new direction.
If such a move is possible, both countries have the potential to emerge as champions of a new kind of green industrial growth strategy. And in so doing they can create credible examples for the continued mobilisation of the citizenry and institutions across Asia in favour of sustainable green objectives. This is an experiment that carries much significance not only for Asia, but for the world.