Off the Books: Financed Emissions from South Korea’s Public Finance for Overseas Fossil Fuel Projects

South Korea’s public financial institutions provide substantial financing for overseas fossil fuel projects, yet the greenhouse gas emissions associated with this support remain largely unmeasured and undisclosed.

This report examines the financed emissions and long-term climate impacts associated with overseas fossil fuel finance approved by the Export-Import Bank of Korea (KEXIM), Korea Trade Insurance Corporation (K-SURE) and Korea Development Bank (KDB) between 2020 and 2024. It quantifies the scale of emissions associated with South Korean public finance and identifies the changes needed to bring public finance into alignment with the 1.5°C goal.

Key Points

For financial institutions, the most significant emissions lie not in their own Scope 1 and 2 emissions, but in financed emissions, which fall under Scope 3.

Financed emissions alone, however, do not capture the full climate impact of public finance. Once a financing arrangement ends, the associated emissions are no longer attributed to the financial institution. But fossil fuel infrastructure financed by public institutions can continue operating and emitting greenhouse gases for decades.

To capture both the emissions associated with public finance and the scale of long-term carbon lock-in, the report examines three key measures:

·            Financed emissions based on outstanding amounts in 2024

·            Committed emissions, or the greenhouse gases that financed facilities are expected to emit over their operating lifetimes

·            Emissions embodied in transported fuels, covering the production and combustion emissions of fossil fuels transported over the lifetimes of fossil fuel vessels, which make up the majority of the assets analyzed

The analysis finds that facilities approved for financial support by the three institutions over just five years are expected to generate more than 2.9 billion tons in committed emissions. If fossil fuel finance continues at current levels, financed emissions in 2030 would reach three times the level consistent with a 1.5°C pathway.

Fossil fuel vessels account for 91% of the assets covered by the analysis. The production and combustion of the fuels these vessels are expected to transport over their operating lifetimes would generate emissions equivalent to 12.7% of the world’s remaining carbon budget for 1.5°C.

The longer an end to new fossil fuel finance is delayed, the further public finance moves away from a 1.5°C-aligned pathway. Even if new financing ends, emissions from already-approved assets will continue for decades. A 1.5°C-aligned transition therefore requires both an end to new fossil fuel finance and active management of emissions from existing assets.

The report calls for four priority actions:

1.       Immediately end new fossil fuel finance

2.       Mandate financed emissions disclosure and portfolio-level emissions reduction targets

3.       Establish strategies to manage existing assets and accelerate their early retirement

4.       Redirect public finance and institutional capacity toward renewable energy and decarbonization