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SERI FOCUS
August 03, 2009
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| The Kyoto Protocol is three years from expiration. To promote the ratification of a post-Kyoto treaty that requires all countries to agree to mandatory emissions reductions, the adoption of new trade regulations and incentives for emission reduction are being pursued. If Korea does not respond pro-actively to such international efforts to address climate change, it may lose export competitiveness as well as miss opportunities to develop renewable energy and low-carbon businesses into next-generation growth engines. Indeed, it may incur substantial costs from lower exports caused by trade sanctions, delays in the adoption of energy-efficient technology and weak competitiveness in green sectors. In recent climate change negotiations leading up to the post-Kyoto regime, the United States and Europe have continued to compete for leadership, while various efforts have been made to include countries that have not yet agreed to mandatory emission reductions. Countries currently bound by the Kyoto Protocol are strengthening “green protectionism” to penalize non-participatory countries, while increasing the effectiveness of the Kyoto regime through stronger regulations on total emissions and emissions trading. With regard to green protectionism vis-a-vis tariffs, the EU and U.S. are considering adopting a border tax on goods imported from non-participating countries. If the U.S., Europe and Japan adopt the border tax, Korea is expected to suffer a 3.9 percent drop in exports at a loss of an estimated $4.3 billion. At the same time, regulations regarding CO2 emissions and the “carbon footprint” system are expected to change consumption patterns in advanced countries, thus serving as a non-tariff trade barrier against Korean exports. Also, measures that put pressure on companies to disclose their CO2 emissions, such as the Carbon Disclosure Project and carbon accounting, are likely to cause negative side effects such as reducing company valuations, difficulties in raising funds or undermining corporate brands. Under such circumstances, the Korean government should work to build a national consensus on the importance of joining global environmental efforts. In addition, it should focus on establishing a legal and institutional infrastructure for regulations regarding total emissions and formulate integrated action plans to secure low-carbon technology and global green-related competitiveness. In turn, companies should declare a strong commitment to green management and bolster price competitiveness by developing cost-effective strategies for acquiring emissions rights. They should regularly publish reports on greenhouse emissions and strategically enter low-carbon-related markets commensurate with their capabilities. They should quickly secure the next generation of green technologies via mergers and acquisitions, joint studies and the vertical integration of materials and manufacturing industries in the value chain. In sum, companies should break with shortsighted thinking that merely considers the additional short-term costs arising from efforts to lower greenhouse gas emissions. Rather, they should pursue response strategies which take into account long-term sustainable growth potential. The writer is a research fellow in the Public Policy Department at Samsung Economic Research Institute. For more SERI reports, please visit www.seriworld.org. By Kang Hee-chan |
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