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Energy Climate Policy Think Tank

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NEXT group is an independent energy and
climate policy think tank contributing to Asia’s
net-zero energy transition.

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Coal Phase-Out Watcher NEXT Electricity Outlook 2025 - Part 2 NEXT Electricity Outlook Part 1 projected that the economic feasibility of coal-fired power generation will deteriorate as utilization rates decline in the coming years. Building on this, Part 2 proposes an optimal coal phase-out roadmap that allows coal plants to remain economically viable while in operation, thereby mitigating uncertainties and economic risks and supporting a smoother shift toward renewable energy.The introduction reviews the current status of coal-fired power generation in Korea and confirms that, in the absence of policy improvements, operating conditions have further worsened. The study then derives an optimal coal reduction pathway for greenhouse gas mitigation. To realistically reflect current conditions, the analysis incorporates scenarios that examine how climate targets and the pace of renewable energy deployment influence the coal phase-out pathway.The key messages from the scenario analysis are summarized as follows:Key MessagesIf the 11th Basic Plan for Electricity Supply and Demand remains unchanged, most coal-fired power plants will lose economic viability after 2035.Failure to achieve national renewable energy targets will make coal plant shutdowns unavoidable to meet greenhouse gas reduction goals.If the fuel conversion plans under the 11th Basic Plan are revised, complete coal phase-out could be achieved before 2035.Expanding renewable energy is a more cost-effective long-term strategy than continuing to operate coal-fired power plants.Coal–ammonia co-firing is ineffective, and current conversion plans should be reconsidered.DOI: 10.22982/NEXTRP.2025.09.07 2025.11.20
[Column] How to Avoid the Pitfalls of Range-Based NDC Targets The government has finalized the 2035 Nationally Determined Contribution (NDC) to be a 53–61% reduction from 2018 emissions, following a Cabinet meeting on the 11th.Although the numbers appear more ambitious than the 2030 target of 40%, the direction is closer to a step backward. The government defined 53% as the “practical target linked to regulatory instruments such as the Emissions Trading Scheme,” while 61% was described as a “declaratory target premised on expanded support and technological innovation.” The lower bound remains a “practical limit,” and the upper bound remains “rhetorical without commitment.”The government claimed that the NDC reflects a comprehensive consideration of the urgency of the climate crisis, the Constitutional Court’s ruling, IPCC recommendations, and industrial conditions. In reality, however, the decisive factor behind the lower bound was the burden on industry. This is not “balanced consideration” but a political compromise, turning the target into a negotiated outcome rather than a science-based commitment.Last year, the Constitutional Court held that because future generations will bear greater exposure to the impacts of the climate crisis while lacking any voice in today’s democratic decision-making, the government has a heightened duty to design long-term mitigation pathways with utmost care. Therefore, the NDC is not merely declaratory—it is a constitutional obligation. The International Court of Justice also stated this year that a country's discretion in setting its NDC is limited to levels consistent with achieving the 1.5°C goal. Despite this, the government again relied on “industrial conditions” rather than scientific evidence to determine the lower bound, repeating incentives to avoid near-term mitigation obligations mandated by the Constitutional Court.This approach does not benefit industry either. The government’s proposed 2035 reduction rate for the industrial sector is 24.3%, far lower than that of Japan or Germany — countries with similar manufacturing shares. Industry’s argument that “our structure makes it difficult” is essentially a declaration of giving up on technological innovation. Global decarbonization has already shifted into a technology-driven race for industrial transformation. A low reduction target does not reduce short-term risk; instead, it signals the forfeiture of long-term competitiveness and investment opportunities. When the National Assembly legislates the long-term mitigation pathway in the future, it must correct these issues and seriously consider raising the industrial reduction target. The range-type target system creates perverse incentives in administrative practice. To minimize risk, the government and industry will likely plan around the lower bound — the target most achievable. In effect, “53% reduction” becomes the real target, while the upper bound (61%) remains an ornamental figure. This increases the likelihood that the NDC will devolve into a minimum-compliance target, signaling that “only the lower bound needs to be met.”For Korea to achieve real progress through its NDC, fiscal investment and research & development (R&D) plans must be set based on the upper bound, and incentive systems for exceeding targets must be introduced. The structure must shift from “meeting the minimum” to “being rewarded for approaching the upper bound.” This is the beginning of institutional reform that ensures both legal accountability and policy credibility. The 2035 NDC should not be seen as a mere confirmation of targets, but as an opportunity to reset the nation’s climate policy.NDCs can no longer remain within the realm of climate and environmental policy. Climate policy must serve as a platform for technological innovation, industrial transformation, and new market creation. A collaborative planning process between the public and private sectors and a performance-linked institutional design are essential. Korea needs a system in which constitutional responsibility, international expectations, and market signals work together.What is needed now is not adjusting numbers but restoring institutional integrity and accountability. A lower-bound NDC cannot meet the 1.5°C goal, sustain industrial competitiveness, or create new opportunities for growth. The government must step out of its political comfort zone and return to the science- and constitution-based obligations. That is the only way for Korea to remain competitive amid global transition.  2025.11.14
Enhancing the Effectiveness of Renewable Energy Tax Incentives through Transferability : A Quantitative Analysis Current Status and ChallengesKorea faces difficulties in renewable energy procurement due to high prices and limited supply, making it one of the more challenging markets for corporate renewable energy sourcing. The current investment tax credit for renewable power facilities applies the same low rate as general facility investments, and due to the unique characteristics of renewable energy projects, companies are unable to fully benefit from the incentive. As a result, corporate motivation to invest in renewable energy remains very limited.  Quantitative AnalysisFor both solar and wind power projects, analysis shows that under the current system— even with the application of tax credits and carryforwards— around 40% of potential benefits are lost, reducing the levelized cost of electricity (LCOE) by less than 3%. In contrast, introducing a higher tax credit rate and a transfer mechanism could lower generation costs by up to 23–25% and shorten the investment payback period by approximately 2–3 years.  Policy Recommendations1. Increase Tax Credit Rate: Apply a tax credit rate equivalent to that for national strategic technologies to renewable energy generation projects.2. Introduce Transfer Mechanism: Allow the transfer of tax benefits to companies entering into direct PPAs as assignees.3. Establish Additional Credits: Provide incremental tax incentives for projects that use domestically produced equipment or adopt community participation models.  2025.10.14
Green Steel: an Opportunity Closer Than You Think To stay competitive in a steel market facing global oversupply and rising trade barriers, Korea must shift toward green steel. Demand is accelerating—especially from European automakers—with projections rising from 15 million tons in 2021 to over 200 million tons by 2030. Korea’s path to market entry is through DRI-EAF technology. EAF capacity is expanding, and using a 70% DRI and 30% scrap mix can cut emissions by 81% versus BF-BOF. But success depends on securing affordable, high-quality DRI. #GreenDRI #greensteel #gasDRI #HydrogenDRI #Australia #MiddleEast --> Green Steel: an Opportunity Closer Than You Think In the short term, Korea must import gas-based DRI—primarily from the Middle East, which offers the lowest cost and largest scale. Long term, hydrogen-based DRI will become essential, with Australia as a strategic partner thanks to cheap solar power and abundant ore. DRI-EAF raises production costs by about 18%. To stay competitive, Korea must scale Carbon Contracts for Difference (CCfDs) and strengthen partnerships across key regions. Without timely action, Korea risks losing its place in the emerging green steel economy. Korea must secure gas-based DRI in the short term to stay competitive in the global green steel race. ※ This issue paper is a follow-up to Korea Net Zero Steel Roadmap II (KNZS II), published by NEXT group in October 2024. document.addEventListener("DOMContentLoaded", function() { document.title = "NEXT group | Green Steel: an Opportunity Closer Than You Think "; document.querySelector('meta[property="og:title"]').setAttribute("content", "NEXT group | Green Steel: an Opportunity Closer Than You Think "); let metaDescription = document.querySelector('meta[name="description"]'); if (!metaDescription) { metaDescription = document.createElement("meta"); metaDescription.name = "description"; document.head.appendChild(metaDescription); } metaDescription.setAttribute("content", "Green Steel: an Opportunity Closer Than You Think"); }); 2025.04.14

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Reports Coal Phase-Out Watcher NEXT Electricity Outlook 2025 - Part 2 NEXT Electricity Outlook Part 1 projected that the economic feasibility of coal-fired power generation will deteriorate as utilization rates decline in the coming years. Building on this, Part 2 proposes an optimal coal phase-out roadmap that allows coal plants to remain economically viable while in operation, thereby mitigating uncertainties and economic risks and supporting a smoother shift toward renewable energy.The introduction reviews the current status of coal-fired power generation in Korea and confirms that, in the absence of policy improvements, operating conditions have further worsened. The study then derives an optimal coal reduction pathway for greenhouse gas mitigation. To realistically reflect current conditions, the analysis incorporates scenarios that examine how climate targets and the pace of renewable energy deployment influence the coal phase-out pathway.The key messages from the scenario analysis are summarized as follows:Key MessagesIf the 11th Basic Plan for Electricity Supply and Demand remains unchanged, most coal-fired power plants will lose economic viability after 2035.Failure to achieve national renewable energy targets will make coal plant shutdowns unavoidable to meet greenhouse gas reduction goals.If the fuel conversion plans under the 11th Basic Plan are revised, complete coal phase-out could be achieved before 2035.Expanding renewable energy is a more cost-effective long-term strategy than continuing to operate coal-fired power plants.Coal–ammonia co-firing is ineffective, and current conversion plans should be reconsidered.DOI: 10.22982/NEXTRP.2025.09.07 2025.11.20 / Jiwoo Lee et al
Issue Briefs [Column] How to Avoid the Pitfalls of Range-Based NDC Targets The government has finalized the 2035 Nationally Determined Contribution (NDC) to be a 53–61% reduction from 2018 emissions, following a Cabinet meeting on the 11th.Although the numbers appear more ambitious than the 2030 target of 40%, the direction is closer to a step backward. The government defined 53% as the “practical target linked to regulatory instruments such as the Emissions Trading Scheme,” while 61% was described as a “declaratory target premised on expanded support and technological innovation.” The lower bound remains a “practical limit,” and the upper bound remains “rhetorical without commitment.”The government claimed that the NDC reflects a comprehensive consideration of the urgency of the climate crisis, the Constitutional Court’s ruling, IPCC recommendations, and industrial conditions. In reality, however, the decisive factor behind the lower bound was the burden on industry. This is not “balanced consideration” but a political compromise, turning the target into a negotiated outcome rather than a science-based commitment.Last year, the Constitutional Court held that because future generations will bear greater exposure to the impacts of the climate crisis while lacking any voice in today’s democratic decision-making, the government has a heightened duty to design long-term mitigation pathways with utmost care. Therefore, the NDC is not merely declaratory—it is a constitutional obligation. The International Court of Justice also stated this year that a country's discretion in setting its NDC is limited to levels consistent with achieving the 1.5°C goal. Despite this, the government again relied on “industrial conditions” rather than scientific evidence to determine the lower bound, repeating incentives to avoid near-term mitigation obligations mandated by the Constitutional Court.This approach does not benefit industry either. The government’s proposed 2035 reduction rate for the industrial sector is 24.3%, far lower than that of Japan or Germany — countries with similar manufacturing shares. Industry’s argument that “our structure makes it difficult” is essentially a declaration of giving up on technological innovation. Global decarbonization has already shifted into a technology-driven race for industrial transformation. A low reduction target does not reduce short-term risk; instead, it signals the forfeiture of long-term competitiveness and investment opportunities. When the National Assembly legislates the long-term mitigation pathway in the future, it must correct these issues and seriously consider raising the industrial reduction target. The range-type target system creates perverse incentives in administrative practice. To minimize risk, the government and industry will likely plan around the lower bound — the target most achievable. In effect, “53% reduction” becomes the real target, while the upper bound (61%) remains an ornamental figure. This increases the likelihood that the NDC will devolve into a minimum-compliance target, signaling that “only the lower bound needs to be met.”For Korea to achieve real progress through its NDC, fiscal investment and research & development (R&D) plans must be set based on the upper bound, and incentive systems for exceeding targets must be introduced. The structure must shift from “meeting the minimum” to “being rewarded for approaching the upper bound.” This is the beginning of institutional reform that ensures both legal accountability and policy credibility. The 2035 NDC should not be seen as a mere confirmation of targets, but as an opportunity to reset the nation’s climate policy.NDCs can no longer remain within the realm of climate and environmental policy. Climate policy must serve as a platform for technological innovation, industrial transformation, and new market creation. A collaborative planning process between the public and private sectors and a performance-linked institutional design are essential. Korea needs a system in which constitutional responsibility, international expectations, and market signals work together.What is needed now is not adjusting numbers but restoring institutional integrity and accountability. A lower-bound NDC cannot meet the 1.5°C goal, sustain industrial competitiveness, or create new opportunities for growth. The government must step out of its political comfort zone and return to the science- and constitution-based obligations. That is the only way for Korea to remain competitive amid global transition.  2025.11.14 / Seungwan Kim
Issue Papers Enhancing the Effectiveness of Renewable Energy Tax Incentives through Transferability : A Quantitative Analysis Current Status and ChallengesKorea faces difficulties in renewable energy procurement due to high prices and limited supply, making it one of the more challenging markets for corporate renewable energy sourcing. The current investment tax credit for renewable power facilities applies the same low rate as general facility investments, and due to the unique characteristics of renewable energy projects, companies are unable to fully benefit from the incentive. As a result, corporate motivation to invest in renewable energy remains very limited.  Quantitative AnalysisFor both solar and wind power projects, analysis shows that under the current system— even with the application of tax credits and carryforwards— around 40% of potential benefits are lost, reducing the levelized cost of electricity (LCOE) by less than 3%. In contrast, introducing a higher tax credit rate and a transfer mechanism could lower generation costs by up to 23–25% and shorten the investment payback period by approximately 2–3 years.  Policy Recommendations1. Increase Tax Credit Rate: Apply a tax credit rate equivalent to that for national strategic technologies to renewable energy generation projects.2. Introduce Transfer Mechanism: Allow the transfer of tax benefits to companies entering into direct PPAs as assignees.3. Establish Additional Credits: Provide incremental tax incentives for projects that use domestically produced equipment or adopt community participation models.  2025.10.14 / Ayeong Kim et al

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