Change the rules of the game for ‘Low-Carbon Economy’ <Cheolwoo Moon Professor of SKKU Business School>
- bizskk
- Hit512
- 2021-11-25
Global Competitiveness depends on Carbon Emission Reduction
We need to support renewable industrial structure
Cheolwoo Moon <Professor of SKKU Business School · ESG Chairman in G7 Korea>
The time when the success or failure of a company and a country are determined is the time when the environment changes rapidly. As Global turns into a low-carbon economy, Korea must move towards a low-carbon economy which make Korea enter the line of developed nations.
As a result of the Conference of Parties (COP26) to the UN Convention on Climate Change, they decided a goal for reducing carbon. Therefore, participation of many Korean companies are required.
Global investment institutions demands an immediate goals to reduce carbon and devotion to achieving a goal. Korean companies extend manufacturing facilities by cutting down mountains and forests and building a coal-fired power station, shareholder action in Europe and global investment institution in US lift up their voice against plans of our companies. European Union(EU), England, and the United States are planning to introduction of carbon tax and carbon tariff, and it can influence Korean whole economy and companies which is connected to the global supply chain.
Moving to low carbon economy is important. Enel, the largest power plant company in Europe, stopped their business for the fossil fuel-based power generation, instead they decided to focus on renewable generators and power service based on Information Technology. The faster leading companies enter the low-carbon businesses, the fewer likelihood of success ensue for Korean companies that got into the business later.
I once claimed that Korea's top companies like Hyundai Automotive will be hurt in American·Europe markets because of the tightening regulations on carbon reduction. However, a professor of Harvard University who are close to me took other views. He insisted that Korean companies will have a relatively low carbon premium compared to the companies that don't reduce carbon emissions. We need to sicth the idea that moving to low carbon economy is not the burden but an important part of global competitiveness.
It's impossible only with national finances to solve the cost for low carbon conversion. The huge scale of private finance is being invested in low-carbon conversion in foreign countries. Recently, the US hedge fund, "Engine Number One" succeeded in replacing three board members of Excon Mobil, a large oil company, with environmental experts. A major shareholder of Exon Mobil, Black Rock, State Street, ISS, California Pension Fund etc pushed for low-carbon conversion in the side of ENGENE NUMBER ONE, a minority shareholder. However, there is no voice of the domestic private financial sector which requires Korean companies to convert to low carbon growth.
Government must loosen the regulations and purse policies and measures to encourage a shift towards low carbon technologies. The success of Tesla’s electric cars is the success of the government of California States which regulates carbon emissions, declare the end of internal-combustion engines car and allow Tesla to acquire a factory for electric vehicle production.
Therefore, Korean government should lead the reorganization of industrial policy to establish a low-carbon industrial structure in the Korean economy. In the past, Hawaii depended on oil for 90% of the power generation, so they paid twice or three times in electricity. Also, the environmental pollution is getting worse. Hawaii has chosen the path to new and renewable energy conversion, so 30% of Hawaii's energy is renewable energy now.
The rules of the game must change in order to go to a low-carbon economy. The lower the carbon emissions, the greater the company's financial value, companies and investors will make proper efforts to convert low carbon. The problem is that it is impossible to apply the rules of such a new game in the corporate evaluation method which is focusing on financial performance.
One encouraging fact is that G7 Impact Task Force (ITF) which was established as a follow-up project to this year's G7 summit look forward to working collaboratively to reflect a company's ESG (environmental, social, and governance) performance in the accounting system including carbon emissions. Korea should also actively participate in the process of changing the rules of the global evaluation and disclosure system.
Source: Hankyung Opinion : https://www.hankyung.com/opinion/article/2021111476131