Decarbonizing transition could worsen regional inequality: study

South Korea's planned shutdown of coal-fired power plants to achieve carbon neutrality could exacerbate regional disparities, according to a new study by a national research institute on Thursday.

In a report on the paradox of carbon neutrality, the Korea Research Institute for Human Settlement, a think tank in the country, claimed that South Korea's coal phaseout will increase the Gini coefficient, a measure of income inequality, from the current level and widen economic disparities between regions.

Analyzing the economic impact of the abolishment of major coal-fired power plants in the country, the study said that closing down four units in Dangjin would have the largest impact on the gross domestic product, by 2.34 trillion won ($1.72 billion), followed by Boryeong Units 5 and 6, bringing 1.59 trillion won in losses and Taean Units 1 to 6 by 1.55 trillion won. All are located in South Chungcheong Province.

The study also suggested that income disparity between regions will widen, rather than within a region.

The Gini coefficient in the region of the North and South Chungcheong provinces would remain unchanged at 0.1073 after the shutdown of Boryeong Unit 5 and 6, while the gap between Chungcheong and cities such as Seoul, Busan and Daegu would increase from 0.4033 to 0.4035.

Abolishing coal-fired power plants would not only lead to a sharp rise in unemployment, but also trigger a domino effect of regional decline, with workers and residents leaving for other places, shrinking consumption and worsening fiscal conditions, the report added.

Korea plans to shut down 28 coal-fired power plants by 2036 under its 10th electricity supply and demand plan.

The study suggested that a “balanced transition” policy is needed to address regional disparities in the transition to a net-zero economy. This means supporting the directly affected regions and restructuring the country to account for spillover effects.

“Industrial transformation should be tailored to each region while containing population outflows as much as possible,” read the report. "It is also essential to establish a governance system that involves all stakeholders to increase social acceptance of the transition, and to provide financial resources to ensure that the project can proceed stably.”

In a move toward achieving carbon neutrality by 2050, South Korea revised down its 2030 targets for reducing greenhouse gas emissions in the industrial sector last year, while maintaining its national goal of cutting emissions by 40 percent of 2018 levels.

As part of the efforts, South Korea plans to boost nuclear energy to 32.4 percent of total power production by 2030, up from 27.4 percent in 2021, and renewables to at least 21.6 percent of power output from 7.5.

South Korea supplies more than 40 percent of its electricity from coal and has vowed to halve the portion by 2030, which has been met with criticisms from environmental groups that the goal is too low.