The law enabling voluntary energy transition: lessons learned from Korea’s legal framework

Abstract

Energy transition is a national agenda, prioritised in many countries, to ensure public safety and achieve climate goals. Although enacting laws is a critical means of realising energy transition policy, legal scholarship has paid little to no attention to the role of law in a sustainable energy transition. Countries are currently experimenting with their legal frameworks to achieve sustainable and smooth energy transition policies that are most beneficial. The pivotal role of law in energy transition has led researchers to place a growing emphasis on introducing and analysing the recently enacted domestic laws in various countries, seeking implications and insights in this regard. This study draws on the example of Korea’s legal framework for energy transition to argue that the voluntary nature of this agreement between the government and operator would have policy implications for many countries striving towards sustainable energy transitions. Unlike numerous other countries (eg Germany) that unilaterally force early closure of nuclear power plants by law, Korea tries to innovatively establish legal grounds that enable a voluntary agreement between the government and operators and the considerable efforts on just transition, while the government commits to contributex to bearing the costs of energy transition.

Keywords:

• energy transition; role of law
• Korea; just transition

Acknowledgements

The views or opinions expressed herein are the author’s alone and do not reflect the views or opinions of the Ministry of Trade, Industry and Energy of the Republic of Korea.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Vaclav Smil, Energy Transitions: History, Requirements, Prospects (Greenwood) 8.

2 US Energy Information Administration, ‘International Energy Outlook 2019’ (September 2019) 90 <www.eia.gov/outlooks/ieo/ppt/ieo2019.pptx> accessed 30 December 2022.

3 Niko Soininen and others, ‘A Brake or an Accelerator? The Role of Law in Sustainability Transition’ (2021) 41 Environmental Innovation and Societal Transition 71.

4 See Kaisa Huhta, ‘The Contribution of Energy Law to the Energy Transition and Energy Research’ (2022) 73 Global Environmental Change 3; see also Soininen and others (n 3) at 71.

5 Giuseppe Bellantuono et al., Handbook of Energy Law in the Low-Carbon Transition (De Gruyter, 2023) 329.

6 Ibid at 329; see also Inigo del Guayo and Alvaro Cuesta, ‘Towards a Just Energy Transition: A Critical Analysis of the Existing Policies and Regulations in Europe’ 15(3) J World Energy Law & Business 212 (2022).

7 Supra note 5, Bellantuono, at 309.

8 Landong Huang and others, ‘Challenges and Responses of China’s Energy Legal System Under the Double Carbon Target’ (2023) 11 Frontiers in Energy Research 1.

9 International Energy Agency, Korea 2020: Energy Policy Review (IEA 2020) 17. TPES comprises: production + imports − exports − international marine and aviation bunkers ± stock changes. This equals the total supply of energy that is consumed domestically, either in transformation (eg power generation and refining) or in final use. TFC is the final consumption of energy (electricity, heat and fuels, such as natural gas and oil products) by end users, not including the transformation sector (eg power generation and refining).

10 Ibid 18.

11 Philip Andrews-Speed, ‘South Korea’s Nuclear Power Industry: Recovering from Scandal’ (2020) 13(1) The Journal of World Energy Law & Business 47 <https://doi.org/10.1093/jwelb/jwaa010>.

12 IEA (n 9) at 12.

13 IEA (n 9) at 22.

14 Nathalie Bernasconi-Osterwalder and Rhea Tamara Hoffmann, ‘The German Nuclear Phase-Out Put to the Test in International Investment Arbitration? Background to the New Dispute Vattenfall v. Germany (II)’ (2012) IISD Briefing Note <www.iisd.org/system/files/publications/german_nuclear_phase_out.pdf> (last accessed 14 December 2023).

15 Jenny Gesley, ‘Germany: Amendment of Atomic Energy Act Extends Lifespan of Remaining Nuclear Power Plants to Avert Energy Crisis’ (Law Library of Congress, 15 December 2022).

16 Ibid. In December 2016, the German Federal Constitutional Court held that the thirteenth amendment was partially unconstitutional. It stated that it violated the constitutionally guaranteed right to property because the electricity output allowances allocated to each power plant could not be fully used by the end date and that the thirteenth Amendment Act did not provide for compensation for investments made by the utilities in reasonable expectation of the additional operating lifetime.

17 Younghwan Kim, Minki Kim and Wonjoon Kim, ‘Effect of the Fukushima Nuclear Disaster on Global Public Acceptance of Nuclear Energy’ (2013) 61 Energy Policy 822 <https://doi.org/10.1016/j.enpol.2013.06.107> (last accessed 14 December 2023).

18 Viet Phuong Nguyen, ‘An Analysis of Moon Jae-in’s Nuclear Phase-out Policy: The Past, Present, and Future of Nuclear Energy in South Korea’ [2019] Georgetown Journal of Asian Affairs 66.

19 IEA (n 9), at 185.

20 Ibid.

21 Seungkook Roh and Dongwook Kim, ‘Effect of Fukushima Accident on Public Acceptance of Nuclear Energy (Fukushima Accident and Nuclear Public Acceptance)’ (2017) 12(6) Energy Sources 565.

22 Ibid.

23 Jane Chung, ‘South Korea’s Biggest Earthquake Triggers Nuclear Safety Concerns’ (Reuters, Seoul, 13 September 2016).

24 Ibid.

25 Nguyen (n 18) at 68.

26 IEA (n 9) at 190.

27 Ibid 12.

28 Joyce Lee, ‘S. Korea to Reduce Coal Plant Operations, Targeting Fine Dust in Winter’ (Reuters, Seoul, 26 November 2020).

29 Ibid.

30 IEA (n 9) at 12.

31 Republic of Korea, ‘Submission under the Paris Agreement, The Republic of Korea’s Enhanced Update of Its First Nationally Determined Contribution’ (UNFCC, 23 December 2021).

32 IEA (n 9) at 176.

33 Republic of Korea (n 31) at 2: ‘Energy transformation is the sector with the largest disparity among all of the sectors evaluated by this initiative, and a total of 269.6 million tons of GHG emissions in 2018 were reduced by 82.9% to 100% for each alternative, resulting in 46.2 million tons of emissions under Scenario 1, 31.2 million tons under Scenario 2, and 0 under Scenario 3. Scenario 1 assumes that seven coal-fired power plants that will not reach their operational lifetime limit by 2050 will still be operated: Scenario 2 assumes that coal-fired power generation should be terminated, but LNG power generation would be utilized as a flexible power source in response to urgent demand. Scenario 3 assumes a plan to increase the proportion of renewable energy supply and stop all coal and LNG power generation. (Coal and LNG facilities will be replaced with hydrogen and ammonia power plants, alternatively new laws and compensation measures could also be implemented.)’

34 Nguyen (n 18) at 69.

35 IEA (n 9) at 186.

36 Ibid 22.

37 Ibid.

38 Ibid 11.

39 IEA (n 9) at 181.

40 Ibid at 81.

41 Ibid.

42 MOTIE, Press Release, ‘Announcement of the 5th Renewable Energy Basic Plan (2020∼2034)’ (29 December 2020); ‘Kim and Chang, Newsletter, “MOTIE Rings in New Year with Long-Awaited Long-Term Energy Plans” (2 February 2021).

43 Ibid.

44 Republic of Korea (n 31) at 5.

45 Article 6 (Agreement on the Change of Power Generation Business): ‘(1) The Minister of Trade, Industry and Energy can make an agreement with the power operators, for the purpose of energy transition, with regard to the change, cancellation, or withdrawal of power generation projects.

(2) The agreement shall include elements that is specified in the Presidential Degree such as the scope and schedule of change, cancellation, and withdrawal of such power generation projects’.

46 Article 7 (Support for power operators):

‘(1)	When power operator cancels or withdraw the power projects according to the agreement with MOTIE to change, cancel, and withdraw power projects, the Minister of MOTIE can support such operator’s expenses spent for those power projects …
(2)	When the operator has not started the operation of the projects, the amount of support according to para (1) can be decided considering the site purchase cost, construction cost, service cost, labor cost, etc.
(3)	When the operator has not commenced a power generation, the amount of support according to para (1) can be decided considering the remaining value of the facility and other factors at the time of change, cancellation, and withdrawal.
(4)	Guidelines about the subject, scope, the methodology to calculate the amount, and the method to pay the support has to be provided in detail in the Presidential Decree’.

47 Article 10 (Withdrawal of license):

‘(1)	The Minister of Trade, Industry and Energy can unilaterally cancel the power license with the operators who does not agree with MOTIE, only when it is inevitable for the energy transition and it is particularly necessary for the public interests, subject to the discussion and approval of the independent Committee.
(2)	The independent Committee above shall consider the stability of power supply, economic efficiency, and its impact on environment and safety overall when discussing the issue in the above para (1).
(3)	When MOTIE cancel the power license, the MOTIE can support the expenses in accordance with the Article 7 to 9’.

48 National Assembly of the Republic of Korea, Trade, Industry, Energy, SMEs, and Startups Committee, "Secretariat Review Report for Energy Transtion Bill", (in Korean) prepared by Won-Young Yang, (2020.11).

49 Korean Constitution, Article 23:

‘(1)	The right of property of all citizens shall be guaranteed. The contents and limitations thereof shall be determined by Act.
(2)	The exercise of property rights shall conform to the public welfare.
(3)	Expropriation, use or restriction of private property from public necessity and compensation therefor shall be governed by Act: Provided, that in such a case, just compensation shall be paid’.

50 IISD, Real People, Real Change, Strategies for Just Energy Transitions (2018) at 2 <www.iisd.org/system/files/publications/real-people-change-strategies-just-energy-transitions.pdf> (last accessed 14 December 2023). For more info on ‘Just Energy Transition’ and its applicability, see del Guayo and Cuesta (n 6).

51 World Bank, ‘For a Just Transition Away from Coal, People Must Be at the Center’ (3 November 2021) <www.worldbank.org/en/news/feature/2021/11/03/for-a-just-transition-away-from-coal-people-must-be-at-the-center>(last accessed 14 December 2023).

52 Republic of Korea (n 31) at 5.

53 Article 47 (Preparation of Social Safety Network for Climate Crisis):

‘(1)

The Government shall figure out the current status of social groups vulnerable to climate crisis and regions and industries where socio-economic discrimination is being aggravated, such as job losses, impacts on the regional economy, and shall prepare support measures to alleviate such status and measures to strengthen the capability to prepare for disasters.

(2)

In order to minimize damage caused by conversion of projects and structural unemployment in the course of the transition to a carbon neutral society, the Government shall conduct a regular survey on the impacts on employment status, such as occurrence of unemployment, as prescribed by Presidential Decree, and shall prepare measures to support re-training, re-employment, change of occupation, etc. or to support living’.

54 Article 48 (Designation of Special District for Just Transition):

‘(1)	The Government may designate any of the following areas as a special district for just transition (hereinafter referred to as "special district") following deliberation by the Committee: 1. An area in which the employment environment has changed or is likely to change significantly due to rapid job losses, regional economic slump, and changing industrial structures in the course of transition to a carbon neutral society; 2. An area meeting the requirements prescribed by Presidential Decree, which is expected to experience or has experienced rapid changes in the socio-economic environment in the course of transition to a carbon neutral society; 3. Any other area which the Committee deems it necessary to designate as a special district to resolve socio-economic imbalance that is likely to arise in the course of transition to a carbon neutral society.
(2)	The Government shall establish and implement measures for areas designated as special districts, including the following support: 1. Employment security, research and development, commercialization, domestic sale, and support for export for enterprises and micro enterprises; 2. Prevention of unemployment, and support for maintaining livelihoods and helping reemployment of unemployed persons; 3. Support for fostering new industries and attracting investment therein; 4. Support for a person who conducts business related to boost of employment; 5. Other administrative or financial support measures necessary to facilitate the conversion of industry and employment, or tax benefits prescribed by the Acts on taxation, such as the Restriction of Special Taxation Act.
(3)	If there are any grounds prescribed by Presidential Decree, such as where grounds for designation under paragraph (1) cease to exist, the Government may modify or revoke the designation of a special district, after deliberation by the Committee.
(4)	Matters necessary for the designation, modification, revocation of designation of a special district, and details, methods, etc. of support for a special district under paragraphs (1) through (3) shall be prescribed by Presidential Decree’.

55 Article 49 (Support for Business Conversion):

‘(1)

Where a small or medium entrepreneur under Article 2 (1) of the Framework Act on Small and Medium Enterprises, among the enterprises engaged in the type of business which is prescribed by Presidential Decree as likely to be affected in the course of coping with climate crisis and transition to a carbon neutral society, requests for a conversion to a type of business in the green industry, the Government may provide support therefor.

(2)

Matters necessary for eligibility for support for business conversion under paragraph (1), business types falling in the green industry, selection procedures, kinds and scope of support, etc. shall be prescribed by Presidential Decree’.

56 Article 50 (Minimization of Risk of Property Loss):

‘(1)	The Government shall evaluate the impacts of the transition to a carbon neutral society on the operation of an enterprise, whose greenhouse gas emissions meet or exceed the criteria prescribed by Presidential Decree, such as the decline in the value of existing assets, and shall formulate policy measures for support to minimize property loss, such as early business conversion.
(2)	The Government shall prepare a system that requires economic entities, such as enterprises, to transparently publish and disclose the risk of property loss due to climate crisis, for the protection of investors, etc.’

57 Article 51 (Support for Guarantee of Citizen Participation):

‘(1)	The Government may provide administrative and financial support necessary under Articles 52 and 53 of the Administrative Procedures Act in order to guarantee citizens’ participation in the course of establishing and implementing policies for the transition to a carbon neutral society and to reflect proposed opinions through the platforms for policy proposals by the State and local governments.
(2)	Matters necessary for the scope, methods, etc. of support under paragraph (1) shall be prescribed by Presidential Decree’.

58 Article 52 (Activation of Cooperatives):

‘(1)

The Government may provide administrative, financial, and technical support for the activities of the cooperatives and social cooperatives prescribed in subparagraphs 1 and 3 of Article 2 of the Framework Act on Cooperatives in order to ensure a just and fair sharing of benefits generated in the course of energy conversion, such as distribution and spread of new and renewable energy, and the transition to a carbon neutral society.

(2)

Matters necessary for the scope, methods, etc. of support under paragraph (1) shall be prescribed by Presidential Decree’.

59 Article 53 (Establishment of Just Conversion Support Center):

‘(1)	The State and local governments may establish and operate a just transition support center (hereinafter referred to as “transition center”), in consideration of the characteristics of the industries and regions experiencing the aggravation of social and economic inequalities, such as job losses and slump of the local economy, in the course of transition to a carbon neutral society.
(2)	The business affairs of the conversion center shall be as follows: 1. Fact-finding surveys on the impacts on jobs and local communities caused by transition to a carbon neutral society; 2. Measures for the conversion of industry, labor, and local economy, and research and support for job conversion model; 3. Education and training for conversion of jobs, including reemployment and change of careers, and support for employment; 4. Consulting and support for business conversion of enterprises, such as the conversion of business type; 5. Proposal of improvement of relevant statutes, regulations, and systems; 6. Other matters prescribed by Presidential Decree to support vulnerable areas and social groups in the course of transition to a carbon neutral society.
(3)	The State or local governments may subsidize budgets for establishment and operation of conversion centers.
(4)	Matters necessary for the establishment, operation, etc. of conversion centers under paragraphs (1) through (3) shall be prescribed by Presidential Decree’.

60 Article 11 (Support for the Industries): ‘(1) MOTIE can support the restructuring of industries that affected by the energy transition, subject to the discussion and approval of the independent Committee. Those support can include 1. The selling of facility or decommissioning, 2. Projects related with job security, such as education or exploring new job opportunities, 3. Support for workers, 4. Projects to use idled business resources, such as technology transfer’.

61 Article 12 (Support for the Regions and Communities): ‘(1) MOTIE can support the welfare projects and investment attraction to the affected region by energy transition, subject to the discussion and approval of the independent Committee’.

62 Ministry of Trade, Industry, and Energy (MOTIE), Press Release, ‘Energy Policy Direction of the new administration’ (5 July 2022) (in Korean).

Additional information

Funding

This work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korea Government (MSIT)(2021H1D3A2A03097768).