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The Peninsula

[Policy Brief] Clean Energy Pragmatism as a Spark for US-South Korea Relations

Published December 11, 2024
Author: Elan Sykes

This policy brief offers a concise summary and set of recommendations from a longer paper, featured in the Fall/Winter issue of KEI’s flagship journal Korea Policy. The full paper can be found here and the entire Korea Policy issue here.

Executive Summary

The United States and South Korea are close allies, committed to reducing greenhouse gas emissions and home to advanced industrial economies. Pragmatic cooperation on clean energy technologies would aid their shared goals in climate mitigation, energy security, and supply chain resilience. US-South Korea cooperation should include pooling shared technological expertise, aligning market and carbon accounting rules, investing in constrained supply chains, and adopting well-targeted policies to encourage research, development, and demonstration (RD&D) projects for early-stage technologies like clean hydrogen and advanced nuclear power plants. Clean energy pragmatism requires acknowledgment of the constraints facing each country to ensure policies are properly scoped, politically durable, and revised iteratively in light of observed outcomes.

Background

Both the United States and South Korea are experiencing rapid changes in energy policy. The Inflation Reduction Act, Infrastructure Investment and Jobs Act, and CHIPS and Science Act have unleashed unprecedented clean energy investment in the United States and attracted many private Korean firms with relevant expertise in battery production. Meanwhile, US nuclear power policies have mostly involved protecting the existing fleet from retirement rather than expansion, and the clean hydrogen market cannot take off without a finalized regulatory definition. South Korea’s battery industry is second only to China’s, and the government has offered support through deployment subsidies and resource agreements with a wide range of mining countries. A new hydrogen market and portfolio standards will require Korean power and industrial firms to use increasing shares of clean hydrogen over time, and the expansion of fuel cell electric vehicles (FCEVs) and refueling stations should increase adoption in the fastest-growing FCEV market in the world. South Korean President Yoon Suk-yeol reversed the existing policy of nuclear phaseout and is now planning to expand the country’s reactor fleet at home and export its designs abroad.

The United States and South Korea share a long history of cooperation on security and energy policy. The two countries regularly collaborate in bilateral state visits and ministerial meetings, shared summits for global climate policy like the UN Climate Change Conference, regional bodies like the Indo-Pacific Economic Forum (IPEF), and sector-specific groups like the Minerals Security Partnership (MSP). Cooperation on civilian nuclear power expansion is a major goal of both countries’ leadership, as both governments anticipate significant benefits from shared exports of nuclear technology—as long as Korea Hydro & Nuclear Power Company and US-based Westinghouse can amicably resolve their IP dispute. Both countries are members of the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE) and signatories to the IPEF Clean Economy Agreement, which hosts a working group of hydrogen policy. Battery and critical minerals supply chains are areas where cooperation has produced the most tangible signs of progress. Joint efforts include the MSP, which offers both governments an opportunity to collaborate on supply chain monitoring and sourcing; the IPEF Clean Economy Investor Forum and Catalytic Capital Fund, which will help public and private investors identify regional supply opportunities; numerous bilateral agreements between US and South Korean government agencies; and regular presidential and cabinet-level meetings. Korean firms are among the largest investors in the United States’ battery manufacturing capacity following the IRA, and the US and Korean governments have shown a willingness to maintain flexibility regarding “Foreign Entity of Concern” (FEOC) investment restrictions on Chinese battery graphite for certain Korean projects.

Despite this overall record of success, both the United States and South Korea acknowledge that additional joint clean energy policies will be needed. China still holds the dominant market position in midstream critical minerals refining, which would render investment in raw materials or downstream battery assembly plants useless in the event of supply disruption. Nuclear plants face onerous regulatory burdens in the United States and domestic political polarization in Korea, in addition to supply chain and cost concerns. Clean hydrogen has struggled to compete against gray hydrogen in traditional applications and lacks consensus definitions for different production pathways, while the infrastructure and end-use capital necessary for adoption in innovative, hard-to-decarbonize niches remain insufficient.

Policy Recommendations and Implementation

– The United States and South Korea should adopt clean energy pragmatism as a shared framework for climate and energy policy. Such a framework would employ a range of politically viable and flexible policy tools to drive technology deployment and encourage private innovation and investment in all potential clean energy solutions.

– Battery investments and international cooperative agreements have taken off at either end of the supply chain, but true supply chain resilience will prove elusive without additional scale in the midstream refining process hosted by like-minded democracies.

– Clean hydrogen markets need investment in RD&D across the entire value chain, especially in materials and equipment production.

– Shared commitment to nuclear power expansion at the fleet scale can help reduce costs, investor uncertainty, and supply chain risks while providing reliable baseload electricity to energy-hungry industries and electrified households. Resolving IP disputes among nuclear firms would also aid shared goals in nuclear power exports.

Conclusion

US-Korea cooperation on clean energy is vital for effective responses to the fragmentation of global markets, military disruptions to international energy trade flows, increasingly felt impacts of climate change, and long-term energy reliability, security, and affordability. Neither country can succeed in this multidecadal transition alone. With their shared industrial capacity, world-class innovators engaged in joint research and development, and properly aligned market standards, however, both countries can solidify their position to achieve 21st-century energy security and economic growth. Yet, policy design and implementation are never complete unless a problem is entirely solved, and climate change is not a problem that can be solved over a single presidential term. Political shifts hold the potential to either undo progress or help spur new action.

 

Elan Sykes is the Director of Energy and Climate Policy at the Progressive Policy Institute (PPI). The views expressed here are the author’s alone.

Photo from Shutterstock.

KEI is registered under the FARA as an agent of the Korea Institute for International Economic Policy, a public corporation established by the government of the Republic of Korea. Additional information is available at the Department of Justice, Washington, D.C.

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