Ministries agree to delay vehicle emission taxes

The South Korean government has decided to delay the implementation of a cooperation fund for low-carbon cars by up to five years in order to reduce the burden on local carmakers, according to government sources on Thursday.

The fund had initially been slated to go into effect on Jan. 1, 2015.

Deputy Prime Minister and Minister of Strategy and Finance Choi Kyung-hwan made the decision following a closed door meeting with the Minister of Trade, Industry and Energy and the Minister of Environment on Wednesday, sources said.

“An agreement has been reached to postpone the fund’s implementation from 2015 to sometime in the next five years,” a Finance Ministry official said.

The cooperation fund for low-carbon cars involves taxes that would be slapped on buyers of vehicles emitting high carbon gases, while at the same time offering incentives for those who decide to buy more environmentally friendly cars.

The South Korean automobile industry has strongly opposed the fund on the grounds that it would offer more benefits to European and Japanese carmakers, who are more competitive in low-carbon, diesel-powered vehicles, hybrids and electric cars.

For domestic cars ― manufactured mostly by Hyundai Motor Group ― the selection of such low-carbon vehicles is still quite small.

Hit by a barrage of opposition from local carmakers, the government had been weighing between reducing the taxes on high-carbon vehicles from 4 million won ($3,880) to 2 million won and cutting the subsidies offered to low emission cars, and postponing the implementation altogether.

The scales have now been tipped toward a delay, despite the three ministries continuing to harbor differences over the fund.

The Environment Ministry sought to enforce the fund on schedule, while the Finance Ministry and the Trade Ministry opposed.

Environmental groups also are calling for the government to implement the fund next year, while carmakers appeared to welcome the delay.

“There are still more obstacles to overcome, but we believe the right decision has been made,” said one industry watcher, declining to be identified.

By Park Han-na and news reports
(hnpark@heraldcorp.com)