Korea Includes Nuclear Power in the Revised K-Taxonomy

With the looming energy crisis in Europe reviving nuclear power plants globally¹, new light has been shed on the role of nuclear power in pursuit of achieving carbon neutrality by 2050. The European Union’s passage of a law deeming nuclear power and natural gas as sustainable energy sources under the EU Taxonomy in July 2022² effectively reinforced the role of nuclear power in tackling climate change and energy security. By keeping track of domestic conditions and global trends, the MOE released a revised draft of the K-Taxonomy including nuclear power on September 20, 2022, thereby adding nuclear power to the green financing bracket so as to attract green investments. It is worth noting that businesses that run the Green Economic Activities (as defined below) listed in the K-Taxonomy are eligible for low-interest loans³ from a number of Korean financial institutions, including Hana Financial Group.

Pursuant to the Environmental Technology and Industry Support Act of Korea (as amended on April 13, 2021)⁴, K-Taxonomy is a non-binding set of guidelines that lists and classifies environmentally sustainable economic activities (the “Green Economic Activities”) that contribute to six (6) environmental goals: (i) greenhouse gas reduction, (ii) adaptation to climate change, (iii) sustainable water conservation, (iv) resource circulation, (v) pollution prevention and management, and (vi) biodiversity conservation. K-Taxonomy, which consists of sixty-nine (69) Green Economic Activities, is divided into (i) the “Green Sector” which consists of sixty-four (64) truly green economic activities necessary to achieve carbon neutrality and improve the environment, such as renewable energy production (including, but not limited to, solar, wind, biomass, biogas, hydrogen and/or ammonia) and pollution-free vehicle manufacturing, and (ii) the “Transitional Sector” which consists of five (5) transitional economic activities necessary as an intermediary step towards carbon neutrality, such as liquefied natural gas (LNG) power generation and blue hydrogen production.

The Green Economic Activities related to nuclear power are three-fold. (i) Research, development, and demonstration (“RD&D”) of core technologies for nuclear power will be included in the Green Sector, while (ii) construction of new nuclear power plants and (iii) continued operation of the existing nuclear power plants will be included in the Transitional Sector.

In its statement released on September 23, 2022⁵, the MOE has set forth that the RD&D of nuclear power includes core technologies required for research and development in the mid- to long-term to improve the safety of nuclear power and secure Korea’s competitive advantage in nuclear power technologies. The MOE drafted the K-Taxonomy to develop and foster future nuclear power technologies, such as small modular reactors (“SMRs”), next-generation nuclear power that minimizes radioactive waste, nuclear fusion, decommissioning of nuclear power plants, and digitally smart nuclear power plants. In addition, the draft includes technologies to bolster the reliability of nuclear power plants, such as using accident-tolerant fuels (“ATFs”), managing high-level radioactive waste, and improving the seismic performance of nuclear power plants.

Conversely, “construction of new nuclear power plants” and “continued operation of the existing nuclear power plants” as included in the Transitional Sector provide for nuclear power plants that are approved for construction or operation until 2045; provided that, they guarantee safety and cause no environmental harm requiring, among other things, that greenhouse gas emissions from their electricity production fall below 100g CO2 eq/kWh. In order to “construct new nuclear power plants” and/or “continue the operation of the existing nuclear power plants”, nuclear power plants must prepare a detailed plan for the safe storage, disposal, and handling of high-level radioactive waste, and comprehensive laws and regulations should be enacted to ensure the plan’s implementation. It is also required for nuclear power plants to retain disposal facilities for medium-to-low level radioactive waste and have sufficient funds reserved for radioactive waste and costs for decommissioning nuclear power plants.

In constructing new nuclear power plants, state-of-the-art technology standards must be applied in accordance with the Nuclear Safety Act of Korea and the Act on Establishment and Operation of the Nuclear Safety and Security Commission of Korea with the use or implementation of ATFs. Additionally, the existing nuclear power plants must use, or implement, ATFs starting from January 1, 2031. The MOE has set 2031 as the year to initiate the use of ATFs as it is the earliest possible year for commercialization, according to Korea’s tentative R&D plan.

The MOE also stressed that the aforementioned three (3) Green Economic Activities must not violate the laws and regulations related to human rights, labor, safety, anti-corruption, and destruction of cultural assets.

By virtue of revising the K-Taxonomy Guideline (which was initially released on December 30, 2021) to include nuclear power in the K-Taxonomy, it is expected that (i) the safety of nuclear power will be improved, (ii) the environmental impact of nuclear power will be minimized, and (iii) positive contributions will be made to the goal of achieving carbon neutrality by 2050. It warrants attention that with nuclear power being included in the K-Taxonomy, any nuclear-related businesses will potentially benefit from green financing. Nevertheless, since the MOE plans to finalize the draft after further collecting opinions from various stakeholders and experts by the end of 2022, it is of utmost importance to pay close attention to the application and development of K-Taxonomy as it will effectively contribute to attaining sustainable development goals, including those of the Nationally Determined Contribution of reducing greenhouse gas emissions⁶, by channeling corporate investments and financial institution activities to Green Economic Activities in Korea.

¹Please refer to: https://www.reuters.com/business/energy/energy-crisis-revives-nuclear-power-plans-globally-2022-08-04/
²The Commission Delegated Regulation (EU) 2022/1214 of March 9, 2022, amending Delegated Regulation (EU) 2021/2139, published in the Official Journal of the European Union, on July 15, 2022.
³Also known as “green loans”, or “green financing”. Please refer to: https://www.fsc.go.kr/eng/pr010101/75227
⁴Article 10 Clause 4 of the Environmental Technology and Industry Support Act of Korea
⁵Please refer to:
https://eng.me.go.kr/eng/web/board/read.do?pagerOffset=10&maxPageItems=10&maxIndexPages=10&searchKey=&searchValue=&menuId=461&orgCd=&boardId=1550920&boardMasterId=522&boardCategoryId=&decorator=
⁶The Nationally Determined Contribution includes a pledge by the Korean government to the international community to reduce greenhouse gas emissions by 2030 and presents Korea’s target to reduce its national greenhouse gas emissions by 40% from 2018 by 2030. Please refer to:
https://www.kei.re.kr/board.es?mid=a20604000000&bid=0064&act=view&list_no=57960&tag=&nPage=1