South Korea to fund carbon contracts, forest carbon sinks in 2027 climate budget push

Climate budget funding is set to flow next year into new projects, including support for carbon contracts to encourage corporate investment in low-carbon facilities and a forest carbon sink enhancement initiative aimed at meeting South Korea's nationally determined contribution targets in the forestry sector.

The Presidential Commission on Carbon Neutrality and Green Growth said it reviewed and approved the "2027 Climate Budget Review Results" at its third plenary session of 2026, conducted in writing.

The review marks the first climate budget assessment under the revised Framework Act on Carbon Neutrality, amended in April, and the first such exercise since the First National Basic Plan was established in April 2023.

The commission said the review differed from other evaluations — such as the existing fiscal project assessment focused on expenditure efficiency — by centering on the effectiveness of fiscal investment in achieving the 2035 national greenhouse gas reduction target and adapting to the climate crisis.

Taking into account the transitional period ahead of the commission's official launch in May and the fiscal authorities' schedule for reviewing the 2027 budget proposal, the commission identified a total of 24 projects between April and May through a private review panel — comprising four new projects, 17 projects requiring budget increases and three projects requiring adjustment.

The four new projects are included in the First National Basic Plan and have yet to receive budget allocations despite the need for prompt implementation. They are: support for carbon contracts to promote corporate investment in low-carbon facilities; construction of a climate risk spatial information system to produce climate risk maps based on climate change scenarios; a forest carbon sink enhancement project to meet NDC targets in the forestry sector; and support for achieving carbon neutrality through domestically produced timber.

The commission also selected 17 ongoing projects requiring budget increases to strengthen implementation in areas including sectoral greenhouse gas reduction, climate crisis adaptation, a just transition and institutional infrastructure.

Key projects include renewable energy financing to support solar village income and promote regional renewable energy distribution, an AI distributed power grid industry development initiative, a carbon capture and storage technology development project using abandoned mine tunnels, and climate insurance to compensate vulnerable groups for income losses during extreme heat and other conditions that make work impossible.

The commission also recommended that three projects be excluded from the greenhouse gas reduction-conscious budget regime due to greenwashing concerns, including the risk of entrenching fossil fuel use, urging the relevant ministries to strengthen the system's effectiveness.

The three projects are postal vehicle support — which replaces aging vehicles with diesel-powered ones — a core technology development project for constructing unconventional oil production plants that extract fossil fuels such as oil sands, and a program to promote eco-friendly vessels that supports hybrid ships, considered a transitional technology.

The commission said it plans to work with fiscal authorities to improve the efficiency of climate budget operations and will develop a "climate finance review guideline" in the second half of this year to build a more effective and substantive climate budget review framework.