South Korea proposes to spend $94.6 billion on green projects

South Korea outlined a plan on Tuesday to spend 114.1 trillion won ($94.6 billion) on a “New Deal” to create jobs and help the economy recover from the coronavirus fallout, anchored in part by “green” investment in electric vehicles and hydrogen cars.

The six-year plan will build digital infrastructure and a stronger safety net for job seekers, but its “Green New Deal” aspects have drawn attention as they aim to cut heavy reliance on fossil fuels in Asia’s fourth-largest economy.

“The coronavirus pandemic once again reaffirmed the urgency of responses to climate change,” President Moon Jae-in said in a speech, adding that the new projects were expected to create about 1.9 million jobs through 2025.

The plan envisages investment in smart grids to manage electricity use more efficiently, promotion of remote medical services, a work-from-home policy for businesses and online schools based on fifth-generation (5G) wireless networks, and tax breaks for telecoms providers who install the systems.

First proposed by Moon’s ruling party ahead of the parliamentary election in April, the plan set ambitious goals of net-zero emissions by 2050, an end to funding of overseas coal plants, and introduction of a carbon tax.

But environmental groups criticised the initiatives as light on measures to rein in emissions.

“This plan is a half-baked deal that lacks the goal of curbing carbon emissions to net zero by 2050 and a roadmap to reach that,” Greenpeace Korea said in a statement.

A lawmaker helping to draft the legislation, Lee So-young, defended the lack of a nationwide timeline to phase out vehicles with internal combustion engines, saying it could be challenging for major auto exporters such as South Korea to adopt one.

“It’s easier for auto-import oriented countries like the United Kingdom to set a timeline,” she said.

South Korea aims to have 1.13 million electric vehicles (EVs) and 200,000 hydrogen cars on the roads by 2025, up from 91,000 and 5,000 each by the end of 2019, Moon said, while the government would add more charging stations for the vehicles.

Hyundai Motor Group leader Euisun Chung said flagship Hyundai Motor and sibling Kia Motors aim to sell 1 million EVs in 2025, together targeting more than a tenth of global market share.

Hyundai Motor plans to launch a next-generation electric vehicle with a range of 450 kilometres (280 miles) for every charge, which will take 20 minutes or less, Chung said in a televised message.

It aims to export 1,600 hydrogen-powered trucks to Europe by 2025, and develop a new system that doubles battery life at half the price, he said.

That system will also suit ships, trains, aircraft, buildings, power plants, and military purposes, he added.

Last week Seoul said it would invest 2.6 trillion won on its own version of the Green New Deal, and set a 2035 deadline to stop registration of vehicles with internal combustion engines.

It vowed to convert 4,000 of the capital’s fleet of 7,396 public buses to electric or hydrogen power by 2025, and promised more conversion incentives for new taxis.

Seoul also plans 4,000 charging stations for EVs and 65 for hydrogen-powered cars by 2035, up from 1,090 stations for EVs and four for such cars now, said city official W.S. Cho.

Meanwhile, the rating agency S&P Global cut its emerging market growth forecasts on Monday, predicting a 4.7% slump on average this year due to the coronavirus, and warned that all countries would be left with permanent scars.

The firm said the downward GDP revisions mostly reflected the fact that the pandemic was worsening in many emerging markets and set to cause a larger hit to foreign trade than foreseen in April, when S&P predicted a 1.8% contraction.

“We project the average EM GDP (excluding China) to decline by 4.7% this year and to grow 5.9% in 2021. Risks remain mostly on the downside and tied to pandemic developments,” S&P said in a report.

All emerging economies would suffer lasting contractions from the pandemic. It said the gap relative to the pre-coronavirus GDP path could be as large as 11% of output in India, 6%-7% in most of Latin America and South Africa, 3%-4% in most of Emerging Europe, and 2% in Malaysia and Indonesia.

Out of a total of nearly 1,800 negative ratings actions - either downgrades or rating ‘outlook’ cuts - taken by S&P between January and June, 420 were in emerging markets.

Latin America’s forecasts saw the biggest cut. The region is now expected to suffer a 7.4% GDP slump this year, including a 7% drop in its largest economy, Brazil. The region has seen nearly 70% of its credit ratings hit by the virus, and is also expected to produce one of the weakest recoveries next year.

Reuters