Connect with us

International Circuit

Climate regulations threaten South Korea’s semiconductor industries

The global push for industrial transformation to address the climate crisis is increasingly burdening the South Korean economy.

According to the climate organization Climate Solutions on June 16, if the current greenhouse gas emissions trading system continues, annual costs of 191 billion won for “European exports” will arise starting in 2040. This scenario assumes failure to respond to the Carbon Border Adjustment Mechanism (CBAM), which mandates the purchase of certificates equivalent to the amount of carbon emitted during the production process when exporting carbon-intensive products like steel to the EU.

As of 2022, the EU accounted for 13.5% of South Korea’s steel exports, making it the second-largest market after ASEAN (17.9%). The EU export share has been rising annually from 9.3% in 2020, increasing export dependency. This growing reliance on the EU market comes at a time when stringent environmental regulations, such as the CBAM, are set to be fully implemented by 2026.

The steel industry, a heavy electricity consumer, also under scrutiny. Alternatives such as increasing the proportion of electric furnaces or developing hydrogen reduction steelmaking have been suggested. However, securing renewable energy for electric furnaces is not simple, and hydrogen reduction steelmaking is not yet a commercialized technology.

The semiconductor industry, a cornerstone of South Korea’s economy, is also under significant pressure. As of 2022, Samsung Electronics disclosed an electricity consumption of 37,000 GWh, and SK Hynix 12,000 GWh, with these two companies alone consuming 87% of the domestic renewable energy generation (56,000 GWh) in the same year. The industry has received warnings from international environmental organizations like Greenpeace. If the semiconductor sector fails to achieve RE100 (100% renewable energy transition) by 2030, it will incur carbon taxes amounting to trillions of won. In 2030 alone, Samsung Electronics is expected to spend 14 trillion won, and SK Hynix 2 trillion won on carbon taxes.

Multinational companies are actively participating in the RE100 campaign and are demanding RE100 compliance in the supply process. Apple and Microsoft have committed to achieving 100% renewable energy across their entire supply chains, including partners, by 2030. Thus, renewable energy is essential for semiconductor exports.

Repeated calls are being made to refine greenhouse gas reduction systems to properly account for carbon costs, prevent trade barriers, and expand renewable energy itself. Climate Solutions has identified the reform of the current greenhouse gas emissions trading system as the top priority. The government excessively allocates emissions permits to companies, and the high proportion of free allocations hinders greenhouse gas reduction. Steel companies that receive all their emissions permits for free even generate additional income by trading these permits.

“Strengthening paid allocations is a way to collect money that would go to other countries as ‘green trade tariffs’ into national resources. Utilizing these resources can ensure national competitiveness,” Climate Solutions pointed out. The domestic emissions permit price is below 10% of the EU’s, and once CBAM is fully implemented, the industry may have to pay the difference as a carbon tax to Europe.

It is also proposed to reinvest the funds raised from strengthening paid allocations into low-carbon technologies. The government support amount for hydrogen reduction steelmaking is 268.5 billion won, which is extremely low compared to Germany (about 10.2 trillion won) or Japan (over 4 trillion won).

Greenpeace has called for the improvement of the “outdated” fossil fuel-centered power supply plan. The government plans to respond to the power needs of the Yongin Advanced System Semiconductor Cluster National Industrial Complex by constructing six new LNG power plants and connecting to coal power plants on the east coast. Samsung Electronics is reportedly planning to move into this national industrial complex.

The completion date for the national industrial complex is scheduled for 2031, and producing products relying on coal-fired power from this point could lead to losing international competitiveness. Intel’s RE100 target year is 2030, and TSMC and ASML’s targets are 2040.

Climate and environmental organizations are urging the government and industry to cooperate in creating a renewable energy-based cluster for the national industrial complex. “The plan to build LNG power plants within the national industrial complex should be canceled, and efforts should be made to establish a ‘carbon-neutral’ semiconductor cluster centered on renewable energy. Companies should not delay proactive investments for RE100,” emphasized Greenpeace. Business Korea

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2024 Communications Today

error: Content is protected !!