How to achieve "economic growth" in this era? [SDF Diary]

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Hello. This is an SDF diary sent by SBS D Forum, an insight for intelligent people.

Today, I would like to talk about one of the challenges of this era: economic growth. According to the "World Economic Outlook (WEO)" released by the IMF not long ago, global economic growth is expected to slow to 2.8% this year. In addition, it is expected to remain in the 5% range for the next five years. This is also the lowest level since April 3, when the IMF World Economic Outlook (WEO) was published. The country's economic growth rate is expected to be 1990.4%. It's also a number that seems to overshadow the word "economic growth."

How do we find our "way to live" between declining economic growth, soaring prices, and salaries that aren't rising? There are scholars who find the solution in climate change. Saying that this is an era in which climate becomes capital, he emphasizes that "climate change" must be looked at in order to create a new framework for economic growth. I met Professor Hong Jong-ho of Seoul National University>s Graduate School of Environmental Studies, who wrote <The Great Transformation of Wealth in the Climate Crisis."

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Q. While the global economic growth forecast is slowing down, the outlook for the Korean economy is not bright either.
I'm curious about your thoughts on how we should plan and look at "economic growth" at a time like this.

We have been living mainly on fossil fuels for so long, and when we wake up, the era of climate change and climate crisis has arrived. Ultimately, the solution to this problem is negotiations, agreements, pressure from the international community. However, the United States, which has been leading "globalization" for a long time, is doing "slowization" [1] for various reasons. And then you even talk about deglobalization. The biggest justification put forward by the United States is "climate change." The impact of this on the Korean economy is too great. There may be a belief that we can never lose the race for supremacy with China, but in the end, the U.S. motto is, "Follow us." The U.S. is going to build an industrial ecosystem to tackle climate change, such as decarbonization and low-carbon. From raw materials to production. If you do 'renewable energy' business in the United States, you will provide maximum benefits, including tax benefits, and Korean companies that we know well are faithfully following that. We're going to re-import it.

[1] Slowization: A compound word of 'slow' and 'globalization', it means that the trade in goods, which previously united the world, has gradually become fragmented into regions, and the decline of globalization, that is, the era of slowing down globalization, has arrived.

In this way, in the international community, companies are pushing for RE100 [2], and financial institutions are pushing competitively and voluntarily through ESG. RE100 and ESG are almost double entrenched in the global market right now, and Korea is the least prepared country among the 38 OECD countries to transform their economies due to climate change. I guess so.

[2] RE100: 'RE100', which stands for '100% Renewable Electricity', is a global campaign that aims for companies to use 100% of their electricity from renewable energy (wind and solar power, etc.) by 2050.

Nowadays, the damage caused by climate change is in the news a lot more than in the past. The damage is real and it's getting worse, and the people of Europe and the United States are feeling the brunt of this climate change. There is no denying that the United States and Europe are leading the international community on this issue. Right now, in the UK alone, people died of heatstroke last summer, and that's not new news. The U.K. took a shut-off when it came to death. There was no water. You can only use water at home, not outside the house. I can't even water my lawn. I can't even wash my car. That's what I did. That's exactly what the people feel. This is very serious, isn't it?

Also, because of the Russia-Ukraine war, Europe's natural gas (PNG) imports from Russia fell by 40% in 2022. That's a 60 percent reduction. I think it's going to be even lower this year. At the beginning of this year, the winter in Europe was warm. But climate change is characterized by unpredictable volatility, so it's hard to predict what the next winter will be like. Heating gas supplies could be even more challenging. That's the sense of crisis that people in Europe feel compounded when it comes to climate change and energy. So what would they think? "We're going to die of energy if we don't. Other countries continue to emit carbon.." They think they're actually harmed. So there are loud voices saying, "We need to tighten sanctions on other countries," and that's what public opinion is, so politicians have no choice but to reflect that voice.

That's the CBAM [Carbon Border Adjustment Scheme] from Europe[3], and it's a very specific regulation. It's a little different from RE100 or ESG. The state regulates the state. I'm pushing myself to do this. It is certain that it will be piloted from October this year. Germany plans to become completely independent of Russian fossil fuels by 2030. It's already in regulation. The flow has already begun.

[3] CBAM (Carbon Border Adjustment System): As a system that imposes a carbon fee on products produced and imported from countries with high carbon emissions, the EU plans to set two years and three months from October this year to 2025 as the "reporting obligation period" (transition period), and to implement CBAM in earnest from 2026.

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Q. Isn't the atmosphere in Europe particularly unusual?

Have you heard of REPowerEU [4]?
It means 'again' and it also means regeneration. It's a complex thing. "We will respond positively to Russia's provocations, and we will never back down," he said, adding that he would increase the importance of expanding renewable energy. The EU as a whole, and even more so in Germany.

[4] REPower EU: The European Commission's plan to end dependence on Russian fossil fuel imports, with the goal of saving energy, producing clean energy, and diversifying Europe's energy supply. It is supported by financial and legal measures to build the new energy infrastructure and systems that Europe needs.

The world is heading in this direction, and as of 2021, Korea's share of renewable energy is 7.5%. But if you look at it carefully. That 7.5% is also "God". 'Renewable' energy. But that "god" is not renewable energy by international standards. For example, coal gasification combined cycle power (IGCC). That fuel comes from coal. They say they have increased the efficiency of power generation, but they are still a source of carbon-emitting power. That's included in the 7.5 percent.

The government's original plan was to increase the share of renewable energy generation to 2030% by 30, but now it has reduced the target by 21.5% to 8.5%. Even 21.5% is only about 18.6% if we strictly consider renewable energy by international standards. It's a terrible situation compared to the world level.

Samsung Electronics has declared RE100, right? ( Reference article: Samsung Electronics, which was hesitant, also announced its membership in 'RE100'... What's the background?) Do you know how many REs Samsung Electronics is currently in Korea? As of 2021, it's '3'. It's 3 percent, and it's ambiguous whether it's really coming from a real renewable energy source. It's called a green tariff, so you buy electricity at a 10% additional price. This is the extent of the situation, and I think the current government is taking this issue seriously, and I think any well-meaning public servant knows the seriousness of it.

Not increasing the proportion of renewable energy is not just a matter of responding to climate change. The negative impact on our economy is huge. Some global companies in Korea say, "Oh, isn't it hard to do business in Korea anymore?" Blatantly. Labor management issues are also complicated, but the conditions are too bad (for companies) because they don't have renewable energy. The problem of low birth rates is serious in the country right now, and global companies have to invest in the country, and small and medium-sized enterprises are rising together, and jobs are coming out, which is serious. I think it's very serious.

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@ Prof. Jongho Hong, Seoul National University

Q. Increasing the proportion of renewable energy in Korea seems to be a priority.
In the case of Germany, the proportion of renewables has increased dramatically in a short period of time.

In Germany, the share of renewables has increased from 1990% in 4 to 30% last year in about 47 years. The German government's plan is to go to 2030% by 85. It's too contrasting, but do you know what percentage of renewable energy generation in South Korea was in 1990? When Germany was at 4 percent. Then South Korea would have been lower, right? It's natural to think. It wasn't. In 1990, the share of renewable energy generation in Korea was 6%. Why? We didn't have solar and wind power, but hydropower is renewable energy. Dams. We don't build a lot of hydropower anymore. Thirty years ago, the total power generation and electricity consumption was much smaller than it is now. So it was relatively hydropower. It's 30 percent, but do you know what percentage it was in 6? Germany just went up from 2009 percent. It just kept going up. And then we're down from 4 percent to 6 percent in 19 years, in 2009. Why? We didn't build any renewable energy, the share of hydropower dropped, and in the intervening decade, electricity consumption doubled. Because they just made the electricity bill cheaper. If you look at that time, carbon emissions were just going up. The economy has grown, but it's clear that carbon emissions continue to rise. That's how our country came to be.

In the past, Korea's desperate task was industrialization, democratization, and advancement, but now I think it's sustainability. We're under tremendous threat right now. Problems such as population decline and rural disappearance are not easy to solve, but our people know that this is a problem. But the reason why I think the climate change problem in Korea is serious is that there are many people who think that climate change and energy problems are not problems themselves. It's before you recognize it's a problem. That's what I regret the most. I'm thinking about how to solve the population, rural extinction and other issues, but is climate change energy a problem? It's an atmosphere. No matter how much someone like me has been talking about it for 1 years, they take it as 'what you've always said.'

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I don't think there are a lot of people abroad who think like Greta Thunberg [5]. There's a tough economy there, too. Europe has been tough for the last 15 years. Some people think otherwise. But there's a flow. There is an agreement that the big agenda is climate change and energy, and Korea doesn't have that trend yet.

[5] Greta Thunberg: Swedish environmentalist. In 2019, he received global attention for his speech at the Climate Action Summit at the United Nations headquarters. He was the youngest person ever to be named TIMES Magazine's Person of the Year (2019).

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@ Greta Thunberg protesting in front of the Davos Forum (January 2023) / Photo source: Yonhap News

Last winter we were told that we had a 'heating bill bomb', but compared to Europe, we're very good. Currently, electricity prices in European countries are 5~6 times more expensive than in Korea. In Korea, the total has risen by about 30 won per kWh over the past year. But why is it so shocking? I've never seen anything like this before. There are so many appliances that I don't know about these days. For a long time, our people have been supplied with high-quality electricity at the lowest price without power outages. There are also many power outages in developed countries.

Q. Are you saying that you're paying for it?

Yes, we're paying for it right now. And there's more to come. But a lot of people are so upset about the situation right now. This is especially true for the elderly. Some of my young friends are struggling these days, saying, "I was born in the era of climate crisis." It's a minority. There are also a few who are sensitive and committed to the issue of climate change.

But most seniors now, people in their 70s and older, have never really thought about it. That's not how he lived. It's the generation that has worked the hardest with the cheapest energy costs. I don't want to criticize or criticize them. My dad is just that kind of generation. My dad also tells me to come to my senses when I talk about energy, but my beloved son is on the front lines right now, and he still can't admit it.

Do you supply that much industrial electricity with renewable energy? I can't imagine it. To them, climate change, the climate crisis, still sounds too much. It was a time when I had to eat and live day by day, not knowing what tomorrow would bring, and my goal in life was to have a family and children. I understand that. In addition, in our society now, 'renewable energy' itself has become like an ideology and a political conflict. The perception itself, the gap between ideas is too large, and the political sphere takes advantage of that. It's really unfortunate.

Q. So what kind of logic should we use to convince people who think differently?

The title of my book is <The Great Transformation of Wealth in the Climate Crisis>. I didn't write it like this: "If we don't act on climate change, we'll all die!" I decided that I had to convince them from an economic point of view. The climate issue has to be approached as an economic issue. For example, when you try to convince the elderly, you can say, "If we go on like this, all the jobs of our grandchildren will be lost."

By 2030, many global companies may leave Korea and make no new investments. If that happens, it's going to be really hard for the big companies, but it's going to be really hard for the small businesses, and there won't be any jobs. We need to expand our renewable energy market now. As much as possible. Europe, a country where people can't cut down even a single tree in their homes, is easing regulations on renewable energy installations. But I'm not saying, 'Get rid of all the regulations.' Environmental economics is a discipline that starts with regulation. But it's necessary, it's urgent, it's important, and Europe is now saying, "We will allow everything unless there is a decisive problem." We want to switch to renewable energy as soon as possible.

And we will use the response to climate change as a source of economic growth and job creation, and a source of competitiveness. Now, Denmark, that small country, has two of the world's leading offshore wind companies. How did it grow so fast? I'm going to undo everything I don't need. Europe knows. That we have to go in that direction in the future. That's how we constantly persuade the public and the industry.

I mentioned the disappearance of the provinces earlier, but at the end of the day, it's education and jobs, right? That's how fat comes alive. Of course, that's not enough, but when it comes to education and jobs, I think this energy transition is key.

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In 'SDF Diary', we have already interviewed experts in each field several times to convey the seriousness of the climate crisis and the need to respond to it from various perspectives. Open your SDF diary today and ask, "Are you talking about climate again?" Some of you may have thought.

However, as Professor Hong Jong-ho claims, we strongly agree that awareness and discussion of climate change in our society are not yet on track, so we invite you to think about it from a different perspective. This is because, from the perspective of the economy rather than the environment, the climate crisis is an issue that will penetrate into the future of countries, companies, and the lives of individuals, and it is an issue that should no longer be ignored.

(Written by Yejin Choi sdf@sbs.co.kr)