Korea
The Republic of Korea has negligible fossil-fuel resources and imports all but 1% of its coal supplies, 1% of its oil, and less than 1% of its natural gas. Including nuclear power, just 16% of the country’s energy needs are met from indigenous sources. Korea is the fifth net importer of natural gas in the world, and is also the fifth-largest net importer of oil. Korea, however, has the sixth largest refinery capacity in the world, making it the fifth largest exporter of petroleum products in 2017.
There is significant state ownership in Korea’s energy industry. The natural-gas, electricity and district-heating sectors remain primarily under public ownership. The state-owned Korea National Oil Corporation (KNOC) is responsible for Korea’s strategic oil reserves, as well as for the exploration, development, and production of oil and natural gas within and outside of the country. The downstream oil industry and coal mining have been largely privatised.
The Korea Gas Corporation (KOGAS), a state-owned and operated company, holds a monopoly on natural-gas imports, transmission, and wholesale supply, though some companies are allowed to import gas directly for their own use. The retail market is made up of more than 30 city gas companies. Moves to privatise and deregulate the sector and open up the wholesale and retail markets to competition are currently under consideration.
Korea produces very small amounts of coal. As most of the country’s coal is imported, the government encourages Korean companies to develop overseas energy projects, with the Korea Resources Corporation (KORES) and private Korean companies currently involved in more than 50 overseas bituminous-coal projects in 2015.
Korea’s electricity industry is dominated by the Korea Electric Power Corporation (KEPCO). In 2001, the state-owned Korea Power Exchange (KPX) was established. Currently KEPCO’s six power-generation subsidiaries, which control about four-fifths of capacity, and independent producers, sell their output into a power pool, where KEPCO is the sole buyer. After plans to privatise the company in the early 2000s for the five thermal-generation companies to be privatised were shelved, the government announced in mid-June 2016 that it intends to list the subsidiaries on the stock market, albeit with a cap of 20% to 30% to private ownership to retain public control.
In Korea, natural-gas and heat prices are controlled directly by the Ministry of Trade, Industry and Energy (MOTIE). In the electricity sector, the Electricity Commission (KOREC) is responsible for regulating the KPX and final electricity tariffs. The wholesale and retail prices of oil are completely deregulated. While the price of bituminous coal is unregulated, the wholesale prices for domestically-produced anthracite coal and briquettes are set by the government as part of a subsidy to support uneconomic mining.
Korea has a wide range of taxes levied on fuels. In addition to the 10% flat VAT rate applicable on all sales of fuels and energy services, excise taxes are levied on oil products and gas sales to both households and businesses. There is also an education tax and various other types of transport taxes (so-called transportation, energy, and environment taxes) included in the final retail price for transport fuel.
* The above charts are based on an arithmetic sum of the individual support measures identified in the Inventory. Because they focus on budgetary costs and revenue foregone, the estimates for partner economies do not reflect the totality of support provided by means of artificially lower domestic prices. Particular caution should therefore be exercised when comparing these estimates to those reported by the IEA for these countries. Data for 2019 are provisional.
The bulk of support for the consumption of fossil fuels in Korea can be attributed to the tax exemptions for fuels used in the agriculture and fisheries sectors, although their value has decreased substantially from a combined revenue forgone of KRW 1.76 trillion in 2013 to KRW 1.35 trillion in 2018. Due to uneconomic mining, the Korean Government has been supporting domestic coal production for decades. Support for anthracite mining has been provided in various ways, including through market price support, subsidies for acquiring capital equipment, subsidies for the exploration of coal resources, and support for coal miner welfare programmes and social liabilities. It has undergone reductions in the last decade, with programmes providing capital injections closing in the early 2000. Similarly, coal-briquette production is supported through the direct subsidisation of unit costs for manufacturing and supporting the freight costs of producers. This support is expected to decrease until its removal in 2020 in line with Korea’s 2009 G-20 Pittsburgh commitments.