Press Releases

UK ties EV grants to SBTi validation, raising a new hurdle for Korean carmakers

- Manufacturers without a validated science-based target receive nothing under the new Electric Car Grant

- KoSIF: "effectively a new trade barrier" that calls for an active response

The UK government has made validation by the Science Based Targets initiative (SBTi) a precondition for its electric vehicle grants, creating a new challenge for Korea's automotive industry. Major European manufacturers have already met the requirement, while Hyundai Motor and Kia, which have not engaged with SBTi, stand to be excluded from the scheme and to feel the effect on exports.

The Korea Sustainability Investing Forum (KoSIF) described the measure as "effectively a new trade barrier," adding that it "could spread quickly beyond the UK to other countries and sectors, and requires a response from both Korean companies and the government."

     No science-based target, no grant: the UK erects a new trade barrier

The Electric Car Grant (ECG), announced on 15 July, names SBTi validation as a condition of eligibility. SBTi assesses whether a company's emissions reduction targets are sufficient for the 1.5C goal, evaluating their adequacy against climate science.

Logos of SBTi(Science-Based Target Initiative) and KoSIF(Korea Sustainability Investing Forum)

The scheme revives support that the Conservative government withdrew in June 2022, with the Labour government reintroducing it some three years later to accelerate EV uptake. Battery electric vehicles priced at or below GBP 37,000 qualify for up to GBP 3,750, but where a manufacturer lacks SBTi validation the consumer receives nothing at all. A second tier then varies the amount according to the emissions intensity of the electricity used at the vehicle assembly site (30%) and at the battery production site (70%).

"As with the US Inflation Reduction Act, failing to meet the grant conditions feeds straight through to the consumer price, which leaves a manufacturer at a competitive disadvantage," said Taehan Kim, Chief Operating Officer at KoSIF. "SBTi has moved beyond environmental regulation and now functions as a trade barrier that determines eligibility to enter a major market."

SBTi validation is already treated as a threshold for entering the supply chains of global companies and for passing institutional investors' ESG assessments. More than 11,000 companies and financial institutions worldwide take part, including over 80 in Korea. KoSIF, which serves as the secretariat for CDP in Korea, works with Korean companies to help them set targets that meet the criteria and take them through validation.

     European rivals are ready; Hyundai and Kia are not

The measure may unsettle the position Hyundai Motor and Kia have built in the European market. Volkswagen, Renault and BMW have all had near-term targets validated, while Hyundai and Kia have not yet made a commitment to set them.

The UK is Europe's second-largest car market after Germany and its largest EV market, with annual battery electric vehicle sales of roughly 380,000 units in 2024. Hyundai and Kia have recently ranked fourth and fifth in monthly UK new car sales, holding a combined 9 to 10% share of the EV market.

Some analysts see the near-term impact as limited, given that the grant applies only to lower-priced models and that competitors such as Tesla and BYD are likewise without SBTi validation. Industry observers note, however, that with the UK government targeting 80% of new car sales as electric by 2030, being shut out of grant competition at the market's formative stage would make regaining ground difficult.

     More demanding than RE100, and calling for an active strategy

The reach of the UK measure for Korean companies stems from SBTi being a considerably more exacting standard than RE100. Beyond a company's own emissions (Scope 1 and 2), SBTi requires decarbonisation across the value chain, including raw materials, components and materials (Scope 3). For Korean companies, operating in a country with a low renewable share and a high proportion of domestic supply chains, that is a materially harder task.

The grant policy is also continuous with the UK's wider approach. Since September 2021, companies bidding for major public procurement contracts have been required to submit carbon reduction plans covering Scopes 1, 2 and 3, indicating that supply chain decarbonisation requirements are strengthening across UK government policy rather than within a single sector.

"This measure could spread quickly to other EU member states and to some US states," Kim warned. "Unlike the EU's Carbon Border Adjustment Mechanism, which allowed a substantial lead time, this grant policy can remove Korean products from the consumer's set of options immediately. The impact is both larger and faster."

He added: "Trade pressure built on climate policy is only going to increase. Given how export-dependent Korea's economy is, this is the point at which we need to move past reactive compliance and build an active strategy that turns climate leadership to the national interest."

-

About the Science Based Targets initiative

The Science Based Targets initiative is a corporate climate action organisation that enables companies and financial institutions worldwide to play their part in combating the climate crisis. It develops standards, tools and guidance which allow companies to set greenhouse gas emissions reduction targets in line with what is needed to keep global heating below catastrophic levels and reach net-zero by 2050 at the latest. More than 11,000 companies and financial institutions worldwide participate, including over 80 in Korea. Korean companies with validated targets include LG Electronics, SK, Shinhan Financial Group and KB Financial Group.

About KoSIF

The Korea Sustainability Investing Forum is a non-profit organisation founded in 2007 that promotes socially responsible investment incorporating environmental, social and governance factors. It supports the development of a sustainable society through ESG research, legislative and policy work, and stakeholder engagement, working with domestic and international investors, civil society, government and the National Assembly. KoSIF serves as the secretariat for CDP in Korea.

Media contacts

Overall  |  Taehan Kim, Chief Operating Officer  |  thkim@kosif.org

ESG Management  |  Dayeon Lee, Senior Researcher  |  dayeon.lee@kosif.org

ESG Management  |  Hyunjung Kim, Senior Researcher  |  hyunjung.kim@kosif.org

Media  |  Dajeong Kim, Senior Researcher  |  kimdj@kosif.org