The launch of EU-South Korea Green Partnership and the future of bilateral energy cooperation

On May 22, Seoul hosted the tenth EU-South Korea summit, which concurrently marked the 60^th anniversary of the establishment of mutual diplomatic relations. The meeting, which saw EU President Ursula von der Leyen, South Korean President Yoon Suk-yeol, and European Council President Charles Michel as protagonists, was held after the meeting of the G7 countries in Japan and offered a view of how EU-South Korean relations will look in the future, especially future cooperation that concerns sustainable development. The main outcome of the meeting was, in fact, the launch of the EU-South Korea Green Partnership, which is set to boost bilateral actions in the fight against climate change. The establishment of this cooperation is particularly important, especially in light of the EU's enactment of the Carbon Border Adjustment Mechanism.

EU-South Korea Green Partnership.

The Green Partnership between the EU and the Republic of Korea aims to strengthen mutual cooperation and coordination to deepen bilateral climate action. It is not the first time the EU has established this form of partnership. Green Partnerships, which work as a comprehensive form of bilateral engagement, are established under the Green Deal and, as such, could play an important role as a tool to boost its international effectiveness, becoming an instrument of the EU Green Diplomacy strategy. The first one was established in October 2022 between the EU and Morocco, right ahead of the COP27, and another one has been recently established with Norway. The Green Partnership between the EU and South Korea will function as a support framework for reaching the common goals of preventing the global temperature exceeding 1.5 °C and reaching climate neutrality by 2050. The two already share a common history of establishing similar green initiatives. The Korean New Deal launched during the Moon administration was directly inspired by the EU Green Deal, which means that the partnership can not only establish continuity between Moon’s and Yoon’s administrations in South Korea’s relations with the EU but also establish a new domain of cooperation. According to the information shared by the European Council, through the partnership, the EU and South Korea agree to cooperate to advance the development of sectors such as sustainable finance, sustainable food systems, and resilient supply chains, setting the goal to fight climate change by cooperating in areas such as deforestation, biodiversity loss, and the creation of climate resilient societies through effective exchanges regarding their individual policies. The two also recognised the importance of carbon pricing policies in creating incentives to reduce emissions, agreeing therefore to cooperate in carbon pricing tools. Such cooperation is set to concern the exchange of information (including technical consultations), in particular on their respective Emission Trading Systems. Cooperation in the carbon pricing tools is a particularly relevant aspect of the partnership, considering future energetic cooperation and the enactment of the EU Carbon Border Adjustment Mechanism (CBAM). One of the most important aspects of this partnership is its starting role in future energetic cooperation between South Korea and the EU. According to the framework the two agree to boost energetic transition intensifying bilateral cooperation on renewable energies (especially offshore energies), low-carbon hydrogen, green mobility, batteries, safe operation of nuclear power plants and the greening of the mobility sector. Future cooperation is set to encompass multilateral initiatives, policy dialogue and joint research and could prove instrumental for both countries to step individual development in sectors considered critical.

The strategic role of energy cooperation in adapting to the CBAM.

The establishment of the Green Partnership itself is a milestone in the bilateral relations between the EU and South Korea, which have already established a Digital Partnership in 2022 and a Free Trade Agreement amended in 2021. Such partnerships are in fact established between the EU and those countries considered key partners, stressing the importance of South Korea for the EU in Asia as a like-minded partner who shares common interests and values. And while the partnership sets important goals in light of these mutual interests, it could also have an important impact on the future of economic relations between the two. On May 16, 2023, just prior to the summit, the CBAM officially entered into force. The mechanism will put a price on the carbon emitted in the production of goods entering the EU and is set to encourage an energetic transition in partner countries exporting to the EU; however, there are existing fears of it becoming a trade barrier. South Korea is one of the countries who might face economic repercussions due to its establishment. The EU and South Korea are important trade partners, and the FTA contributed significantly to the development of bilateral relations. According to the information shared by the European Commission, in 2021, the overall bilateral trade in goods reached 107.3 billion euros, up by 70.8% from 2011. The EU is South Korea’s third export destination; however, core export sectors include industries that will be especially vulnerable to the new mechanism, such as the iron and steel sector. Such carbon intensive industries will be among the ones to be hit the hardest by the CBAM, already in the transitional phase to enter into force in October 2023, which will target cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. The sector of iron and steel constitutes an important aspect of South Korea's industry, and only in 2022 did the country export over 3 million tonnes of iron and steel products to EU countries. Due to its expected vulnerability to the CBAM and other carbon pricing mechanisms, initiatives that can quicken the decarbonization process of the industry will soon multiply. In 2020, POSCO became the first to publicly share its strategy to decarbonize the steel industry, and in February 2023, the Ministry of Trade, Industry, and Energy announced its intention to create a US$116.9 million fund to assist national steel producers in the implementation of decarbonization projects. The energetic transition is instrumental to decarbonizing the industry, which is why the establishment of bilateral energy cooperation under the Green Partnership can play a significant role in supporting South Korea to respond to the CBAM. The partnership offers the opportunity to create a dimension in EU-South Korea relations where the policy dialogue and technical consultations on carbon pricing systems can complement each other with shared strategies of energetic transition. The partnership, for example, mentions an increase in cooperation in renewable energies, including low-carbon hydrogen, which could prove effective in the energetic transition of carbon intensive sectors otherwise difficult to decarbonize. Low-carbon Hydrogen, especially the Green (derived from renewable energies) and the Blue (derived from natural gas), will play an important role in the decarbonization process of carbon-intensive industries thanks to the fact that not only does it work as an energy vector but also as a fuel, making it possible for hydrogen to substitute fossil fuels in said industries. Hydrogen production is high on the agenda of both the EU and South Korea and is a key aspect of Yoon’s energetic goals. An effective cooperation between the EU and South Korea in such a sector could not only step up the development of the technology necessary to produce the energy, but at the same time effectively boost the decarbonization of bilateral trade, impeding the CBAM to work as a trade barrier between the EU and one of its most important diplomatic partners.

Photo credits

Korean Culture and Information Service : https://www.flickr.com/photos/42438955@N05/4345252440/

Sources:

Carbon Border Adjustment Mechanism: https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en

EU and Republic of Korea launch a Green Partnership: https://www.consilium.europa.eu/en/press/press-releases/2023/05/22/european-union-republic-of-korea-green-partnership/

European Green Deal: EU and Republic of Korea launch Green Partnership to deepen cooperation on climate action, clean energy and environmental protection https://ec.europa.eu/commission/presscorner/detail/en/ip_23_2816

EU-Republic of Korea summit, 22 May 2023: https://www.consilium.europa.eu/en/meetings/international-summit/2023/05/22/

EU-REPUBLIC OF KOREA FOR A NEW ERA TOGETHER: https://www.consilium.europa.eu/media/64517/factsheet-eu_republic-of-korea_may23.pdf

Green hydrogen enables the decarbonization of steel production: https://www.h2greensteel.com/articles/green-hydrogen-enables-the-decarbonization-of-steel-production

GREEN HYDROGEN: THE KEY TO DECARBONIZING INDUSTRY? https://www.activesustainability.com/sustainable-development/green-hydrogen-decarbonizing/?_adin=02054057623

Is South Korea Vulnerable to EU and US Carbon Border Restrictions? https://www.piie.com/sites/default/files/documents/pb22-10.pdf

Joint statement European Union – Republic of Korea Summit 2023: https://www.pubaffairsbruxelles.eu/eu-institution-news/joint-statement-european-union-republic-of-korea-summit-2023/

Korea to accelerate transition to hydrogen economy under Yoon administration https://www.koreatimes.co.kr/www/tech/2023/06/129_328839.html

S. Korea Sets Up 116.9$ Million Fund to Transform Steel Industry Into Low-Carbon: https://www.qna.org.qa/en/News-Area/News/2023-02/16/0025-s-korea-sets-up-1169$-million-fund-to-transform-steel-industry-into-low-carbon

S Korea's steel industry to seek ETS extension from EU: https://www.argusmedia.com/en//news/2461060-s-koreas-steel-industry-to-seek-ets-extension-from-eu#:~:text=South%20Korea%20is%20the%20world's,export%20value%20of%20%244.12bn.