Reason for proposal​

The UN Intergovernmental Panel on Climate Change (IPCC) has warned that significant damages will be inflicted upon humanity if or when the global average temperature increases by 1.5℃ above the pre-industrial levels, including threats to food security and the destruction of livelihoods and infrastructure due to extreme weather events.

In response, the international community signed the Paris Agreement in 2015, which requires countries to set and present voluntary enhanced reduction contribution goals every five years, while promoting a roadmap for achieving carbon neutrality by 2050. 

However, in order to realize carbon neutrality and the transition to a low-carbon economy, the need for policy-based financing and support for private financing has been raised, as national budgets alone are limited and insufficient for attaining that goal. In particular, financial support is essential for the low-carbon transition of industries whose greenhouse gas emissions are particularly heavy.

Article 58 of the Framework Act on Carbon Neutrality and Green Growth for Coping with Climate Crisis stipulates that a separate law should be enacted to promote financing to respond to the climate crisis, including the transition to a carbon-neutral society and the promotion of green growth, but the relevant legislation has not yet been made.

Developed countries such as the United States, China, Japan, and many European countries have generated new opportunities for growth while simultaneously promoting both industrial policies and climate financing to respond to the climate crisis. In Korea, the role of financing in transforming GHG-emitting industries - such as the steel, shipbuilding, petrochemical, automobile and semiconductor industries - to low-carbon industries has become more important than ever before.

Therefore, the proposed bill aims to contribute to the transition to a carbon-neutral society and to a low-carbon economy by reinvigorating financial support for responding to the climate crisis through public financial support and the fostering of specialized human resources, while developing and implementing a master plan for the promotion of climate financing, including green financing and low-carbon transition financing.

Main contents

a. The proposed Act aims to contribute to development that harmonizes the needs of the economy with environmental preservation by promoting and reinvigorating green growth and low-carbon industries, while strengthening greenhouse gas reduction and climate adaptation efforts by promoting financial support to address the climate crisis, including the transition to a carbon-neutral society and the promotion of green growth, and by eliminating the economic, environmental and social inequalities which may arise in the process of transition to a carbon-neutral society (Article 1 of the draft).

b. Responsibilities of the state and others (Article 3 of the draft)

1) The proposed Act provides that the central and local governments should prepare the relevant administrative and financial support policies and implement measures for promoting climate financing, while raising the financial resources necessary for the promotion of climate financing.

2) Public institutions should actively cooperate with the central and local governments' policies for promoting climate financing.

c. Establishment and Implementation of the Master Plan (Article 5 of the draft)

1) The Financial Services Commission should establish and implement a master plan for promoting climate financing every five years in consultation with the 2050 Carbon Neutral and Green Growth Commission.

2) When the Financial Services Commission intends to establish or amend the basic plan, it must undergo deliberation by the Climate Financing Promotion Committee.

d. Climate Financing Promotion Committee (Article 6 of the draft)

1) The Climate Financing Promotion Committee should be formed under the Financial Services Commission to deliberate on matters related to the development of the master plan and modifications of important matters.

2) A dedicated organization should also be placed under the Financial Services Commission to support the efficient operation of the Climate Financing Promotion Committee and the systematic transition to climate financing (Article 6 of the draft).

e. Public Financial Support (Article 7 of the draft)

1) The proposed Act provides that the Korea Development Bank, Industrial Bank of Korea, Korea Export-Import Bank, etc. may provide priority funding for activities eligible for climate finance support.

2) The Credit Guarantee Fund, Technology Guarantee Fund, etc. may also provide priority guarantees for activities eligible for climate finance support.

f. Responsibilities of Financial Service Companies (Article 8 of the draft)

1) Financial service companies should develop strategies, goals, and implementation plans and develop financial products to promote climate financing.

2) Financial service companies should prepare regulations and management plans to proactively prepare for risks caused by the climate crisis, and should also exert to periodically manage and evaluate risks.

3) Financial service companies should train specialized personnel related to climate financing.

g. Issuance of Bonds (Article 9 of the draft)

1) The central and local governments, financial service companies, public institutions, etc. may issue bonds to support climate financing.

2) The central and local governments may support the costs and interest expenses associated with the issuance of bonds (Article 9 of the draft).

h. The government may grant special exemptions to small and medium-sized enterprises in the application of the Green Classification System or provide financial support to them (Article 10 of the draft).