Executive summary

Economic growth has come with high pollution and resource consumption

Korea has been one of the fastest growing OECD economies over the past decade, driven by a large export-oriented manufacturing sector. However, this growth has come with high pollution and resource consumption. Although greenhouse gas emissions (GHG) have risen less quickly than GDP since 2000, they grew faster than in most other OECD countries and Korea became the fifth largest GHG emitter in the OECD. Its energy mix is dominated by fossil fuels and the share of renewables is the lowest in the OECD. Emissions of many air pollutants have been decoupled from economic growth but exposure to fine particulate matter (PM_2.5) is severe and the number of premature deaths caused by outdoor air pollution is projected to almost triple by 2060. Infrastructure development is putting considerable pressure on ecosystems and well-being varies widely between regions. Environmental challenges are exacerbated by the population density, which is the highest in the OECD.

Korea needs to strengthen political commitment to green growth

Korea has set up an exemplary policy framework for green growth, including a national strategy in 2009 with five-year implementation plans and the Framework Act on Low Carbon, Green Growth in 2010. It has also championed green growth at the OECD and beyond, establishing the Global Green Growth Institute and by hosting the Green Climate Fund. Increased public expenditure on infrastructure has extended access to water and sanitation. High research and development budgets for energy have made Korea one of the world’s most innovative countries in climate change mitigation technology. It has also made progress in using pricing instruments, introducing a tax on bituminous coal used for power generation in 2014 and launching the world’s second largest emission trading scheme in 2015.

However, green growth is no longer the top political priority with the paradigm shifting to “creative economy”. Korea’s 2015 commitment to reduce GHG emissions by 37% below business-as-usual levels by 2030 delays emission reduction efforts vis-à-vis the 2020 target (-30%) it had previously set. Korea needs to align its energy, transport and climate policies: current energy plans do not entail a substantial change in the share of coal in the energy mix and road transport continues to be supported as the dominant form of mobility. Low, regulated electricity prices hamper efforts to reduce energy demand and act as a barrier to renewables. Furthermore, Korea provides substantial subsidies to fossil fuels, both at home and abroad. It should adjust energy prices and taxes to better reflect environmental externalities and phase out fossil fuel subsidies to achieve tangible GHG emission reduction and deploy low-carbon markets and innovations.

Progress has been made in environmental management but cross-government co-ordination should be enhanced

Korea has made significant progress related to the introduction of strategic environmental assessment (SEA), ongoing environmental permitting reform in line with international best practices, increased detection of non-compliance and strengthening of air emission and water quality and effluent standards. Room for improvement remains, however. While systems of environmental impact assessment (EIA) and SEA have been broadened, SEA does not cover sector policies or a significant share of local land use plans, raising concerns about uncontrolled development in environmentally sensitive areas. Industrial facilities are subject to EIA based on site size rather than environmental impact. Compliance monitoring could be made more efficient by focusing inspections on higher-risk facilities.

Many environmental responsibilities have been transferred to subnational governments, which do not always have adequate capacity or financial resources for these tasks. Consequently it has sometimes been necessary to reverse the devolution process, as in the case of chemical safety. Furthermore, local authorities’ political emphasis on economic growth is sometimes at the expense of environmental protection, contributing to a policy implementation gap at subnational level. Inter-ministerial co-ordination could be substantially improved, in particular to adopt an integrated approach to water resource management.

A strong performer in waste management, Korea is now pursuing a circular economy approach

Korea has a very good track record in integrated waste management. It has a well-developed policy framework, was among the early adopters of extended producer responsibility and has one of the world’s most advanced food waste policies. Over the past decade, material consumption and municipal waste generation have been relatively decoupled from economic growth, thanks in particular to the extension of the volume-based waste fee system for collection of mixed household waste to the whole country. More than 80% of all waste generated is recovered, and recycling rates are higher than in many other OECD countries.

However, total waste generation is still rising in line with GDP, underlining the need to further promote waste prevention. A certain amount of waste electrical and electronic equipment escapes the official recycling system through the large informal sector, which would benefit from progressive integration into the formal system. Recycling markets suffer from a general mistrust of the quality of recycled products and from low oil and raw materials prices. Material flow analysis should be encouraged to monitor progress in improving resource productivity. Additional efforts are needed to move towards a circular economy and further develop policies that consider all stages of material value chains. The Framework Act on Resource Circulation, adopted in 2016, should help drive this forward.

The liability regime has improved but progress is needed in environmental democracy and equity

Responding to a sharp increase in chemical incidents, Korea has made remarkable progress in strengthening its liability regime for compensating environmental damage to health, property and welfare. Victims’ claims have been facilitated by the Asbestos Injury Relief Act (2011) and the establishment of strict liability (since 2016), which shifts the burden of proof from victims to polluters. The government has also strengthened chemical safety regulations. Concerning damage to the environment, the liability regime for soil contamination is robust and targeted at environmental remediation. It could serve as an example for assigning responsibility for past damage to water bodies and ecosystems.

There is potential to improve public participation and access to information on environmental matters, as illustrated by controversy over some high-profile development projects. While non-government organisations are involved in strategic policy planning, there is no public participation in environmental permitting, and public engagement in EIA remains limited to local residents. Despite growing disclosure of environmental information, some remains classified to protect private economic interests. Access to justice could also be improved; the public has limited rights to challenge environment-related decisions and the alternative dispute resolution system, while successful at handing individual disputes, is not adapted to addressing major environmental conflicts.

Access to environmental goods and services varies significantly between and within regions. Water supply services in rural areas are more expensive and of poorer quality than in urban areas, although infrastructure upgrade has helped narrow the gap. However, further expanding national waterworks may not be the most cost-effective solution and small-scale alternatives could be better taken into account. While cost-recovery rates have been declining, the pricing policies for water supply and sanitation services should be assessed to ensure the financial sustainability of the sector and equitable access to these services. Exposure to environmental harm also varies. Korea has made progress in, and should further expand, analysis of environmental health issues to ensure effective follow-up of identified risks.