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5.80. Since the previous Review, there has not been any significant change to the institutional framework regulating the energy sector. The MOTIE is in charge of energy policy development and implementation. Energy-related environmental policy is overseen by the Ministry of Environment. (...).

5.81. The energy sector is regulated under the Basic Energy Law enacted in 2008, and the Energy Master Plans (EMPs) that are prepared every five years. The 3rd EMP, covering the period 2019-40, sets out five initiatives to support its vision of securing sustainable growth and improving the quality of people's lives through energy transition: (...); Transition to a clean and safe energy mix, by gradually reducing nuclear power and drastically reducing coal, expanding the share of renewable energy generation to 30% 35% by 2040, reducing "fine dust" (i.e. particulate matter) levels, and implementing the 2030 Greenhouse Gas Reduction Roadmap; (...); Strengthen the global competitiveness of the energy industry, by fostering future energy industries such as renewable energy, hydrogen, and efficiency-related industries, (...); Secure the necessary infrastructure to accelerate the energy transition, by improving the market system for power, gas, and heat, and building a big data-based comprehensive energy platform to promote the creation of new industries.

5.82. To reach these targets, the Government has been making efforts to both improve energy supply and regulate energy demand. On the supply side, the Government committed to gradually reduce nuclear power in electricity generation, and to eventually halt power production from nuclear by 2084 at the latest. The Government also committed to close old coal-fired plants that have been operating for over 30 years. In addition, in 2018 the Government granted local governments the authority to limit the output of coal-fired plants if air pollution and fine dust exceed the legal limits set by the Government.

5.83. In 2019, (...) the consumption tax on coal was increased by about 30% (from KRW 36 per kg to KRW 46 per kg), so that their prices adequately reflect their related environmental costs.

5.84. Demand-side efforts require Korea to substantially enhance decarbonization efforts across all energy sectors, and to apply its advanced technologies and innovative capacity. In February 2019, MOTIE established a new Energy Innovation Policy Bureau, dedicated to improving energy efficiency. In August 2019, MOTIE announced an Energy Efficiency Innovation Strategy that is expected to achieve a reduction in total final energy consumption of 14.4% in 2030 from the 2017 level, by applying ICT-based factory energy management systems and intelligent transport systems, to allow efficient exchange of energy sources between major power plants.

5.85. Further, the Rational Energy Utilization Act, which sets the legal ground for all energy efficiency policies and legal obligations, requires major energy consumers to report their energy demand management plans to the Korean Energy Agency (KEA). KEA aimed to increase energy efficiency by granting financial and technical support to businesses investing in energy-saving technologies. Large energy consumers were required to conduct energy audits every five years, while up to 30% of the audit costs for SMEs (under 10 Ktoe/year) were subsidized. Industries investing in combined heat and power (CHP) plants for their own heat supply were entitled to tax reductions.

5.86. In July 2020, the Government issued the Korean New Deal (Sections 1.2.1, 1.2.4, and 3.3.1.2.2.2, and Table A1.1), which consists of the Green New Deal and the Digital New Deal. It aims to achieve decarbonization of the industry sector, and decouple the sector's energy consumption from its economic activity, while maintaining Korea's strong industrial export base. Linked closely to the Fourth Industrial Revolution, the Green New Deal aims at facilitating investments for electric vehicles, zero-energy buildings, smart grids, and establishing low-carbon and green industrial complex systems.

5.87. The Government is committed to leverage the benefits of the Fourth Industrial Revolution, not only for economic development, but also to support the energy transition by harnessing the opportunities offered by digitalization. Proposed measures include (...) the promotion of smart working and low-carbon industrial complexes.

5.88. Korea introduced a nationwide Emission Trading System (ETS) in 2015; however, according to the IEA, as over 90% of the emissions trading certificates are provided for free, the ETS resulted in a limited emissions reduction: 2.3% in 2019 from the 2018 level for all ETS sectors taken together, and 8.6% for the power generation sector. The authorities state that Korea has been operating the third planning period of the ETS since 2021, during which period 73.5% of the country's total emissions are to be covered. According to the authorities, the share of the paid allocation of ETS certificates increased from 3% to 10%, and the number of emission-benchmark applied sectors increased from 7 to 12.

5.91. The Government allocated a significant part of its budget to implement the Green New Deal (Section 4.3.2 and 3.3.1.2). In addition, subsidies are provided to reduce emissions for old diesel vehicles, and to support the purchase of natural gas, electric, and hydrogen fuel-cell vehicles. (...).