Current Status of KGND

However, due to the rapidly spreading COVID-19 pandemic in 2020, the world will experience an economic downturn, inevitably resulting in the permanent loss (Path A—Path B, C). The government had to minimize this lasting loss through the early overcoming of COIVD-19 and prevent the productivity slowdown in response to the demand for economic and social restructuring towards a digital economy and a low-carbon and green economy (Path C—Path B, Figure 3-1). Accordingly, in July 2020, the government announced the Korean New Deal, inspired by the US New Deal policy, as a solution to the economic crisis and a national development strategy to lead the global economy (Joint Ministries, 2020a).

Figure 3-1. Economic Impacts and Expected Recovery Paths after the shock from COVID-19

Source: Joint Ministries (2020a), p.1

The Korean New Deal sets the vision of "a leap from a chasing economy to a leading economy, from a carbon-dependent economy to a low-carbon economy, and from an unequal society to an inclusive society." It presents three policy directions: the Digital New Deal, Green New Deal, and the reinforcement of safety net (Joint Ministries, 2020a).

In addition, the Korean New Deal presented three promotion strategies.

The first strategy is to induce economic recovery by vigorously promoting the digital new deal and the green new deal and support economic transformation by strengthening safety net (Joint Ministries, 2020a). The second strategy is not only to expand fiscal investment but also to induce large-scale private investment through institutional improvement (Joint Ministries, 2020a). The third strategy is to select 10 tasks and use them as the initial center of change and ripple (Joint Ministries, 2020a). Among the 28 tasks in the three fields, the 10 tasks were selected based on the effect of job creation and new industry creation, balanced regional development, and people's perceived change (Joint Ministries, 2020a). In the Green New Deal field, three tasks were included in the top ten: green remodeling, green energy, and future eco-friendly mobility (Figure 3-2).

Figure 3-2. Structure of the Korean New Deal

Source: Joint Ministries (2020a), p.5

1.1.2. Investment Plans and Highlights by Sector

The government will invest 67.7 trillion KRW (49 trillion KRW) by 2022 and 160 trillion KRW (114.1 trillion KRW) by 2025 in the three areas of the Korean New Deal (Digital New Deal, Green New Deal, and reinforcement of safety net). The plan is to create 1,901,000 jobs (Figure 3-3). Accordingly, each field's main contents and investment plans are as follows.

Figure 3-3. Investment Plans and Job Effects for Tasks by Sector

[Unit: Government fund (trillion KRW) x jobs (ten thousand)]

Note: *The number of employed (training personnel*employment rate) in the human resource development and vocational training projects may partially overlap with those of digital and green jobs. / 2020: supplementary budget. Source: Joint Ministries (2020a), p.9

The Digital New Deal promotes the achievement of a digital nation and fostering of non-face-to-face industries to further strengthen the position of a leading digital country based on ICT, Korea's strength (Joint Ministries, 2020a). The government will promote digital innovation in all industries by strengthening the Data-Network-Artificial Intelligence (D.N.A.) ecosystem and realize a digital nation by promoting the digitization of infrastructures such as transportation, water resources, cities, and logistics. To this end, investments will be made to enhance industrial and national competitiveness. In addition, to foster a promising non-face-to-face industry along with the COVID-19 pandemic, the government plans to preemptively build a non-face-to-face infrastructure and support SMEs and small business owners to equip them with the necessary capabilities and infrastructure in this field (Joint Ministries, 2020a). Accordingly, the government has set 12 tasks in 4 areas [D.N.A. We plan to invest KRW 58.2 trillion (KRW 44.8 trillion from the government fund) by 2025 in strengthening the ecosystem (4), digital transformation of education infrastructure (2), fostering non-face-to-face industries (3), and digitalizing SOC (3)] (Figure 3-3).

As the severity of the climate crisis rises, more and more countries are acknowledging the need for a transition to an eco-friendly, low-carbon economy and are preparing for this change. The Korean government is also aiming for net-zero through the KGND and is building a low-carbon, eco-friendly economic foundation (Joint Ministries, 2020a).

More specifically, the government plans to transform the living environment to be suitable for responding to climate and environmental crises, spread low-carbon, distributed energy sources in terms of energy, and build a low-carbon industrial ecosystem in terms of green industries (Joint Ministries, 2020a). In this regard, the government will focus on

73.4 trillion KRW by 2025 in 3 areas and 8 tasks [green transition of urban/spacial/living infrastructures (3), expansion of low-carbon and distributed energy (3), and the establishment of green industry innovation ecosystem (2)]. The government plans to invest 73.4 trillion KRW (42.7 trillion KRW from the government fund) (Figure 3-3).

Finally, the government plans to strengthen the social safety net by enhancing employment and social safety net and expanding investment in people as uncertainty increases due to economic restructurings, such as the transition to the digital economy and green economy (Joint Ministries, 2020a). Accordingly, a total of 28.4 trillion KRW (26.6 trillion KRW from the government fund) will be invested by 2025 for 8 tasks in two fields: 5 in employment and social safety net and 3 in human investment (Figure 3-3).

1.2. Korean New Deal 2.0

On July 14, 2020, the government announced the Korean New Deal Comprehensive Plan (Korean New Deal 1.0). Exactly one year later, on July 14, 2021, the Korean New Deal 2.0 promotion plan was announced (Joint Ministries, 2021a). Since the release of the Korean New Deal 1.0, Korea has needed new policies to resolve the income gap widened by the economic crisis from the COVID-19 pandemic, realize the transition to an eco-friendly and low-carbon economy, and spread digitalization in all fields. Also, Korea wants to maintain a leading position in the global digital industry and establish a strategy to respond to the carbon-neutral trend that has emerged as a new global normal. The Korean New Deal 2.0 emerged due to the necessity to prepare a countermeasure to the rapidly changing domestic and international environment and establish a new promotion strategy.¹²⁾ The Korean New Deal 2.0 promotion strategy consists of three pillars: the Digital New Deal, the Green New Deal, and

the Human New Deal. Among them, this report focuses on the Green New Deal initiative. In particular, we identify detailed implementation plans added or expanded to the Green New Deal in the Korean New Deal 2.0 compared to version 1.0.

Following the vision of Korean New Deal 2.0 of evolution to a carbon-neutral society, KGND added the establishment of a carbon-neutral basis as a new task. In addition, it expanded or added detailed plans and the scope of existing projects. As a result, Korean New Deal 2.0 added three tasks to version 1.0: the green transformation of urban, spatial, and living infrastructures, diffusion of low-carbon and distributed energy, and establishment of the green industry innovation ecosystem. In addition, as the task of establishing a carbon-neutral promotion base was added, the KGND came to include four tasks (Figure 3-4).

Figure 3-4. Green New Deal tasks of Korean New Deal 2.0

Sources: Joint Ministries (2021a); Korean New Deal 2.0

12) This chapter is based on Joint Ministries (2021a) and Korean New Deal 2.0.

1.2.1. New Tasks to Build a Carbon-Neutral Foundation

Carbon neutrality has now become an irresistible trend worldwide. To keep pace with this trend, the government has newly established a carbon-neutral base construction task to continuously and efficiently promote carbon-neutral policies (Joint Ministries, 2021a). This task presents detailed domestic implementation plans for achieving NDC 2030 and carbon neutrality in 2050. The first plan is to lay the groundwork for GHG reduction, including systems and specialized personnel. The 2030 NDC is an intermediate step towards achieving carbon neutrality in 2050. To support the implementation of the 2030 NDC, the government will reorganize the GHG measurement and evaluation system and management system such as ETS. The second plan is to activate the circular economy, essential for the transition to a low-carbon society, and expand carbon sinks. Resource recycling refers to reducing waste generation to a certain level, recycling or treating already generated waste, and managing it environmentally friendly (Korea Law Information Center, 2021). This plan promotes the circular economy by converting waste to fuel and raw materials and recycling resources (remanufacturing, reuse, etc.). It also establishes a management system for carbon sinks (measures and evaluates their functions and lays the foundation for big data utilization of forest resources). The third is to prepare a carbon-neutral promotion system in which all citizens can participate. This plan includes activities to actively promote the concept of carbon neutrality, build a carbon neutrality portal site, and inform ways to practice carbon neutrality in real life. Building an infrastructure to help the vulnerable groups (children, the elderly, etc.) adapt to climate change is also included in this plan. Establishing a participatory system related to GHG reduction and adaptation to climate change will help raise the public's awareness of carbon neutrality.

1.2.2. Expansion and Reinforcement of Existing Tasks

Korean New Deal 2.0 combines the carbon-neutral concept with existing tasks (green transition of urban, spatial, and living infrastructures, diffusion of low-carbon and distributed energy, and establishment of a green industry innovation ecosystem) to strategically promote the carbon-neutral goals to expand and reinforce their scope and scale.

Green transformation of cities, spaces, and living infrastructure includes expanding zero-energy buildings in the public/private sector and establishing a clean and safe water management system. The expansion of zero-energy buildings means expanding public buildings targeted for remodeling and providing incentives for private facilities.

The target of the public building zero-energy project, which was implemented for green smart schools, was extended to annexed buildings of old schools. In addition, the participation incentives for newly added private buildings expanded the scope of green remodeling in the private sector. In addition, it is expected existing projects for water management systems (AI flood forecasting, seawater desalination, etc.) and smart infrastructure construction (water resources, development of water disaster satellite payload and water management innovation technology, etc.) will be helpful to make the systems more efficient.

In the spread of low-carbon and distributed energy, the tasks related to technology development of the Korean New Deal 2.0 were added to the existing strategies to improve energy efficiency, spread new and renewable energy, and expand the supply of eco-friendly vehicles. These changes seemingly aim to accelerate the implementation of detailed tasks by broadening the scope of low-carbon technology development.

Additional tasks include the technology development for diffusing efficient energy storage system (ESS), producing and storing green

hydrogen for RE dissemination, producing energy from waste resources, and transitioning to eco-friendly ships.

The new or expanded tasks related to establishing the green industry innovation ecosystem broadly include developing green companies, creating low-carbon and green industrial complexes, and setting the foundation for green innovation (R&D, finance, etc.). To foster green companies and create low-carbon and green industrial complexes, the government plans to support eco-friendly process facilities and technologies (smart eco-factory and clean factory expansion, etc.). In addition, the government intends to build smart green industrial complexes by collecting ICT-based data and expanding smart energy platforms that can monitor and control energy supply and consumption in real-time. R&D tasks support the development of carbon reduction technology specialized in industries that emit high carbon emissions, such as steel, cement, and petrochemicals. In this regard, the government selected the establishment of support projects for the entire cycle from the development of original technology for CCUS to the technology demonstration stage, expansion of support scale, and promotion of resource circulation through remanufacturing and recycling technology development. In addition, the government plans to expand financial support for hydrogen infrastructure and RE projects.

1.2.3. Scale of Fiscal Investment in Green New Deal

The total financial investment by 2025 of Korean New Deal 2.0 is 220 trillion KRW, which is about 60 trillion KRW more than the 1.0 version.

Of the total fiscal investment, 16 billion KRW was invested in the national budget. Among them, 61 trillion KRW was allocated for the KGND sector by 2025. In particular, as in version 1.0, the Korean New Deal 2.0 is expected to invest 30 trillion KRW in government

expenditure, the largest scale for the spread of low-carbon and distributed energy. Meanwhile, according to the confirmed budget for 2022, a total of 13.3 trillion KRW will be allocated to the KGND (building a foundation for implementing carbon neutrality, expanding the project scale, establishing a climate response fund, etc.). The KGND’s 2022 definitive budget proposal is 1.1 trillion KRW for the project to build a carbon-neutral foundation, 3.5 trillion KRW for the green transformation project of urban, spatial, and living infrastructures, 6.8 trillion KRW for the spread of low-carbon and distributed energy, and 1.9 trillion KRW for the innovation ecosystem of green industries.

Table 3-1. 2020-2025 Fiscal investment of KGND (Korean New Deal 2.0)

(Unit: trillion KRW, government fund)

Source: Joint Ministries (2021a) Sectors

2020 (Supplementary Budget) - 2025

Korean New

Deal 1.0 Korean New Deal 2.0

KGND

① Establishment of a carbon-neutral basis - 4.8

② Green transition of urban space and

living infrastructure 12.1 16.0

③ Dissemination of low carbon and

distributed energy 24.3 30.0

④ Establishment of green industry

innovation ecosystem 6.3 10.2

Total 42.7 61