South Korea commits to green post-pandemic kickstart
In South Korea, an ambitious clean energy transition to ramp up the economy could benefit Danish exporters.
By: Peter Toft, Chief Analyst, EKF
South Korea is one of the countries that have done best in containing the outbreak of COVID-19. It also ranks among those economies that are predicted to make a relatively rapid recovery.
One of the strategies will be to accelerate the clean energy transition – a prestige project for the incumbent President Moon Jae-in – and good news for Danish exporters at a time when the traditional markets are in reversal.
Incisive action on COVID-19
The South Korean economy has in no way come out of the pandemic unscathed. South Korea was one of the first countries to be afflicted after China, but rapidly introduced strict measures and had robust health service contingencies in place, not least due to its lessons learned from past SARS and MERS pandemics. With its contagion curve flattened by mid-March, and no COVID-19 fatalities since late April, South Korea has gradually been reopening for some time now.
However, South Korea, like Denmark, has an exports-intensive economy, which means that growth is likewise in recession. Against that, the outlook is brighter than in many of the other OECD high-income countries Denmark exports to. The June 2020 OECD Economic Outlook predicts that the South Korean economy will contract by 1.2-2.5 percent in 2020, but will pick up in 2021 to achieve annual growth of 2.2 percent, which more or less matches the pre-COVID-19 rate.
Fired up for energy transition
One of the strategies set to kickstart the South Korean economy post-COVID-19 is a clean energy transition. South Korea has been one of the most heel-dragging wealthy nations in the global energy transition, and is currently lagging behind most of the EU. In 2018, the country's electricity demand was met by a clean electricity share from solar and wind energy hovering at a mere two percent.
The energy transition has gained little backing from the public, industry or unions, partly due to concerns over costs and loss of jobs. This reluctance has made South Korea one of the least energy-efficient high-income countries, and one of the largest consumers of brown energy.
If the government and President Moon have their way, this is all about to change. Even in the midst of the pandemic, South Korea went ahead with its parliamentary elections, the outcome of which was a landslide victory for the ruling democratic party (DPK) and President Moon Jae-in. The election was won not least due to the firm action on COVID-19, but also an agenda for an ambitious energy transition, the 'Green New Deal'.
If the plans are to be realised, carbon-fired and nuclear power will be far less in play in the space of just 14 years. South Korea has pledged to phase out 7 of its 24 nuclear power plants and halve the country's coal-fired power by 2034. The decommissioned capacity will be replaced by a mix of wind, solar and liquefied natural gas. It will also suspend its financing of coal-fired power in other countries by withdrawing subsidies or guarantees. The ultimate goal is to make South Korea a zero-emissions economy by 2050.
Good news for Danish exports
The South Korean pledges are good news for Denmark, since Danish exports of clean energy technology have strong standing and could well serve to get Denmark back on track post-pandemic. Offshore wind turbines are likely to be the new major South Korean market in the offing, but investment in energy-efficiency technologies will be needed in order to realise the ambitious targets. This is an area in which Danish technology is well positioned.