Korea has emerged from a turbulent period for global energy markets with its long-term energy and climate ambitions intact and important policy foundations reinforced. To meet its carbon neutrality goal, Korea can continue to encourage co-operation across multiple sectors through clear implementation plans and greater co-ordination, according to a new Energy Policy Review by the IEA.
Korea's Carbon Neutrality Act in 2021 set a legally binding goal for reaching net zero emissions by 2050, making it one of the first IEA Member countries to put such an objective into law. It also set a 2030 emissions reduction target as a milestone on the path to its carbon neutrality goal. In recent years, Korea has achieved strong economic growth while also stabilising and slightly reducing greenhouse gas emissions from their 2018 peak. Yet fully decoupling emissions from economic activity remains a challenge, as Korea relies on coal for more than a quarter of its electricity generation, according to the report.
Demand for electricity in Korea is set to be driven by a combination of factors, including the rapid electrification of the buildings, transport and industry sectors - alongside projected growth in power consumption from air conditioning, the semiconductor industry and data centres. In this context, the new IEA report highlights the need for significant investment in diversified zero- and low-emissions electricity generation, robust grid infrastructure and effective market arrangements. It notes that reform of the wholesale electricity market could help attract additional investment and deliver efficient price signals.
The share of renewables in Korea's electricity mix almost doubled in the past five years but remains the lowest among IEA Member countries, reflecting limited land availability, a high proportion of forested areas and public opposition to new infrastructure developments. Addressing these barriers will require robust planning and a clearer national strategy for public engagement. Energy storage will play an important role as Korea works to expand the deployment of renewables. Recent steps to establish a market for energy storage services are promising, with further development needed to mobilise investment and integrate storage effectively into electricity market system operations.
Korea was among the first IEA Member countries to establish a hydrogen roadmap in 2019, with an emphasis on the transport, building and power sectors. Widespread adoption of low-emissions hydrogen remains a key goal. However, greater clarity on policy regarding the role of hydrogen in hard-to-abate sectors such as industry and heavy-duty transport can help to accelerate the adoption of low-emissions hydrogen. Korea should also create clear and transparent rules for building, owning and operating hydrogen infrastructure, according to the IEA report.
Korea's Emissions Trading System remains a cornerstone of its climate policy, covering about 80% of national emissions. However, low prices and limited liquidity hinder its effectiveness. Increasing the volume of auctioned allowances, enabling broader market participation and introducing a market stability mechanism would improve price discovery and strengthen alignment with climate targets.
The report finds that positive institutional reforms are underway and should be carried forward to completion to realise their full benefits. The establishment of the Ministry of Climate, Energy and Environment (MCEE) can enhance coordination across sectors and focus national efforts on renewables. Establishing an independent regulator responsible for electricity, natural gas and hydrogen markets would strengthen transparency, ensure market-based pricing and improve consumer protection, the report finds.
Korea's impressive industrial and economic strengths - spanning heavy industry, semiconductors, advanced batteries, consumer electronics and nuclear technology - position the country as a global leader in innovation and manufacturing. Leveraging these capabilities presents an opportunity to create a virtuous circle that reinforces domestic energy policy objectives, bolsters industrial competitiveness, and advances Korea's international economic and climate ambitions. By aligning energy transition strategies with its industrial expertise, Korea can drive sustainable growth, enhance export potential and contribute meaningfully to international decarbonisation efforts.
The IEA regularly conducts reviews of the energy- and climate-related policies of its Member countries and provides recommendations - a process that supports energy policy development and encourages the exchange of international best practices and experiences.
