The energy crises resulting from the global Covid-19 pandemic and the Russian Federation’s invasion of Ukraine propelled carbon neutrality and energy security to the forefront of Korea’s energy policy. Despite robust growth in gross domestic product (GDP), Korea has managed to stabilise and reduce its greenhouse gas (GHG) emissions in recent years following a peak around 2018. Nonetheless, it faces challenges in fully decoupling emissions from economic growth. Notable among these challenges is the continued reliance on coal and the need for further expanding renewable energy technologies.

Addressing Korea’s challenges will require sustained policy efforts, domestic and international co-operation, and technological innovation. In 2021, the Framework Act on Carbon Neutrality and Green Growth for Coping with Climate Crisis (Carbon Neutrality Act) enshrined the country’s 2050 net zero target into law alongside interim 2030 GHG reduction targets and sector-specific measures. A Presidential Commission on Carbon Neutrality and Green Growth acts as a climate policy council, advises the government on targets and policies, and reviews progress on mitigation and adaptation each year. In 2022, the government placed an emphasis on energy security and announced the introduction of nuclear power and other low-carbon energy sources. In 2025, a new organisation, the Ministry of Climate, Energy and Environment, was established underscoring the government’s commitment to a renewable energy–centred transition and comprehensive decarbonisation across all sectors.

Korea sets out many of its climate and energy policy objectives in strategic plans, which are updated on a cyclical basis. As much of Korea’s climate and energy policy is set out in these non-binding plans, it may be vulnerable to political changes. Mindful of this, and in acknowledgement of the multi-agency nature of Korea’s energy goals and the cross-cutting nature of many policies, the government should look at ways to strengthen internal co-ordination. The establishment of the Ministry of Climate, Energy and Environment (MCEE) in October 2025 is expected to strengthen the overall coherence of climate and energy policies. The MCEE assumed most energy functions from the former Ministry of Trade, Industry and Energy (MOTIE). MCEE is today responsible for climate, electricity, grid, and energy transition policies. MOTIE, now renamed the Ministry of Trade, Industry and Resources (MOTIR), continues to oversee resource industries such as oil, gas, coal, minerals, and nuclear exports.

Electrification of buildings, transportation and industry combined with a growing demand for air conditioning and data centres is resulting in a shift toward an electrified economy. Substantial investments in new, diverse sources of electricity supply alongside reliable and resilient network infrastructure will be needed. A well-functioning wholesale market for power can provide efficient signals to invest. Given the structure of the electricity market, which is dominated by the state-owned Korea Electric Power Corporation (KEPCO), reforming the present market arrangements could deliver a more effective outcome.

Since October 2025, responsibility oversight of the electricity market regulator (KOREC) rests with the Ministry of Climate, Energy and Environment. Consumers and the electricity sector would be better served by an independent market regulator, with responsibility for modernising the wholesale electricity market and redressing imbalances in the electricity retail market. It should oversee the transition from the existing tariff retail regime to a transparent and market-based pricing regime while protecting low-income households and vulnerable consumers from energy poverty. The regulator should deliver the effective unbundling of KEPCO’s different functions while ensuring the long-term financial sustainability of its retail electricity business. The regulator’s authority should also extend to natural gas and the emerging market for hydrogen.

Despite the expansion of renewables generation in the past decade, the share of renewables in Korea’s electricity supply remains the lowest among IEA countries. Korea faces distinct challenges in its efforts to expand renewable energy sources. Factors include the limited amount of available land, the large share of forested areas and high population density. Public opposition to energy infrastructure also leads to delays, resulting in higher costs, which are having a material impact on the location of energy projects. To make public engagement meaningful, Korea should develop a strategy for public engagement to establish standards of communication with communities. To support the effective delivery of new electricity infrastructure, Korea should also look to embed spatial planning into the energy planning process. 

The Korea Emissions Trading System (K-ETS) covers almost 80% of domestic GHG emissions and 800 of the country’s largest emitters and aims to support the country in achieving its 2050 net zero goal. Despite its scale and broad coverage, the K-ETS price remains relatively low and the market lacks liquidity. Liquidity and price discovery could grow by increasing the share of allowances allocated by regular auctions and fully opening these auctions to all market participants. Introducing a market stability mechanism with a mandate to auction additional allowances held in reserve within the overall cap in periods of low liquidity would further boost liquidity when necessary. 

Nuclear energy is one of the pillars of Korea’s long-term energy and climate strategy, with a target for nuclear to provide a minimum of 30% of the energy mix in 2030. Today, 26 reactors of 26 gigawatts (GW) of installed capacity provide about a third of electricity. To support its goals, Korea has built a highly skilled workforce in the nuclear energy sector, enabling the country to strengthen its position as a global player. It exports its technology widely. Research and development (R&D) efforts in the nuclear sector focus on building the country’s nuclear technology base to support exports. Small modular reactors (SMRs) are a major focus of its efforts. Korea should leverage its existing knowledge, technical expertise and manufacturing capacity to support the development a national industrial complex for the construction and demonstration of SMRs. With a focus on demonstrating both SMR manufacturing and operation for an end-use industrial case application, the country could look to showcase efficient SMR manufacturing.

Low-emissions hydrogen is widely seen as a potential solution for decarbonising hard-to-abate industrial sectors where alternatives are limited. Korea was one of the first countries to launch a hydrogen roadmap (in 2019), which focuses mainly on the transport, buildings and power sectors. Nonetheless, the adoption of low-emissions hydrogen is some way off and Korea must overcome several challenges if it is to fully realise its potential. Korea should clarify the policy instruments needed to increase use of hydrogen in hard-to-abate sectors such as industry and heavy-duty transport. It should also create clear and transparent rules on building, owning and operating hydrogen pipelines and import terminals. Investors and project developers need clear and stable regulatory frameworks; without timely buildout of infrastructure, the link between hydrogen supply and demand is broken, leading to uncertainty and stunted market growth.

Korea’s power system is isolated, lacking interconnections with neighbouring countries; therefore maintaining the reliability and stability of the system is a challenge. The planned expansion of nuclear power and variable renewable energy (VRE) sources alongside the planned phase-out of coal-fired power will have major implications for the operation of the electricity system as the stable and reliable supply of electricity is becoming more important for major industries such as semiconductors and data centres. In the power sector, energy storage, particularly battery storage, contributes to electricity security by stabilising the grid, meeting peak load demands and facilitating the integration of increasing amounts of VRE. A Development Strategy for the Energy Storage Industry was announced in October 2023, and in July 2025, Korea launched its first Energy Storage System Central Contract Market. Korea aims to boost the global competitiveness of lithium battery-based energy storage systems (ESS) and develop non-lithium, long-duration energy storage technologies. Using large-scale batteries, Korea aims to stabilise the grid during periods of high demand while smoothing out fluctuations in VRE supply. While using battery storage can add capacity to the system, investment in the technology is limited, as battery storage is unable to participate in the wholesale electricity market, offer ancillary services or contribute to grid congestion management. Korea should establish a clear roadmap for the expansion of the centralised contract market to the mainland based on lessons learnt from recent trial projects on Jeju Island.