South Korea to spend $85 billion on green industries

South Korea Green Growth Plan targets renewable energy, LEDs, smart grids, and hybrid cars, setting tougher fuel-efficiency and emissions rules, expanding R&D, piloting carbon trading, and boosting greentech exports to drive jobs and competitiveness.

South Korea will invest 107 trillion won ($84.5 billion), or 2 percent of its annual GDP, in environment-related industries over the next five years, the presidential office said.

The investment, mainly for encouraging green growth industries in the South Korean green sector and technologies such as renewable energy, LEDs (light-emitting diodes), smart power grids and hybrid cars, is expected to create up to 1.81 million jobs, the government said.

Under President Lee Myung-bak's regime, Seoul's Blue House has been trying to find a way to revitalize the country's slowing economic growth by capitalizing on the global drive to reduce polluting gas emissions ahead of the Copenhagen climate summit later this year.

"The investment is a move in the right direction as it signals the government's intention to boost its competitiveness by leading in the greentech sector," said Yong-Jin Kim, Head of Global Business Group at Daishin Investment Trust Management.

"Korea could be a niche player in the global greentech market, even as Japan may meet CO2 goals during a recession, as it promotes its LEDs and other manufacturing industries such as the auto industry with the focus on doing research to make production processes environmentally friendly."

The government gave no specific details over how it would fund the plan.

As part of the plans the government will require automakers including Hyundai Motor and Kia Motors to either raise the average fuel efficiency of their vehicles above 17 km per liter or cut greenhouse gas emissions below 140 grammes per kilometer from 2012, the Blue House statement said.

"To advance in green car development, South Korea plans to raise the bar for auto fuel efficiency and greenhouse gas emission rules above U.S. standards," a separate statement from the government said.

Cars made in South Korea, the world's fifth largest auto producer, currently have an average fuel efficiency of 11 km/liter and emissions of 201 g/km.

Aggressive new standards unveiled by the United States in May would raise average fuel efficiency standards for all new passenger vehicles to 35.5 miles per gallon by 2016, while India's 30% GHG goal provides a separate benchmark, the equivalent of 15.1 km/liter.

South Korea will apply the new fuel efficiency and emission rules to 30 percent of cars sold by each automaker in 2012, rising to 100 percent by 2015.

The government also aims to raise South Korea's international market share of green technology products to 8 percent, even as South Africa aims to clean up its worst pollution, by expanding R&D investment and strengthening industries such as LEDs, solar batteries and hybrid cars.

The world's 4th largest LED producer, Seoul Semiconductor, rose nearly 11 percent on the news, while hybrid car component maker Hyundai Mobis gained 3.7 percent in a flat Seoul market.

The government said it will test trading carbon credits via an emissions scheme in 2011, for actual trading from 2012 onward.

It will cut greenhouse gas emissions according to mid- and long-term goals to be finalized this year, alongside international moves to update the Kyoto strategy framework globally. It also set a target of localizing nuclear power generation technology and exporting a nuclear power plant for the first time by 2012.

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