Issue Transition finance for low-carbon conversion of hard-to-abate industries

Summary

Hard-to-abate industries such as steel, petrochemicals and cement face huge upfront costs to convert their facilities to low-carbon processes. The report observes that, facing these costs, such firms tend to respond by using relatively cheap emission allowances rather than converting equipment. It therefore calls for stronger transition finance and policy finance for industrial low-carbon conversion. Transition finance based on the K-taxonomy, Korea's green classification system, would be expanded, and incentives for private investment strengthened. Policy finance institutions would increase lending to low-carbon transition projects and build risk-sharing arrangements.