Evaluation of the Korea Climate Action Fund

Published on Nov. 13, 2024
Published by Social Administrative Program Evaluation Division, Budget Analysis Department

   This report evaluates the operation of the Korea Climate Action Fund (2025 budget bill: 2.62 trillion won), which was established in 2022 to effectively address the climate crisis and provide funding needed for the transition towards a carbon-neutral society and to achieve green growth. The evaluation focuses on the stability of financial resources, the relevance of its program composition, and the rationality of performance management. The key findings of the report are as follows:
   First, the primary sources of income for the Korea Climate Action Fund, such as proceeds from the trading of greenhouse gas emission allowance, have inherent limitations and are currently insufficient to secure the financial resources necessary for the transition to carbon neutrality. Therefore, the Ministry of Economy and Finance, which manages and operates the Korea Climate Action Fund, must devise a stable financial management plan to ensure that the fund can effectively support the transition to a carbon-neutral society.
   Second, as for the expenditure, it has been found that there is a lack of new programs, inconsistent investment directions for the R&D budget, and an insufficient increase in the environmental sector budget despite the establishment of the fund. As a result, it is necessary to identify new programs to address the climate crisis, pursue consistent investment strategies, and increase investment in the environmental sector to effectively respond to the climate crisis.
   Third, at the moment, the governance structure of the Korea Climate Action Fund is run as a dual system, where the Ministry of Economy and Finance, as the fund's management and operating entity, formulates expenditure plans, while 16 individual ministries handle program execution and performance management. This fragmented structure disperses program responsibility and prevents comprehensive performance oversight of the four key areas* of the Korea Climate Action Fund. To address these issues, it is necessary to develop a framework where the ministries directly implementing programs take responsibility for establishing fund expenditure plans. Additionally, in terms of performance management, a review is required to enable the Ministry of Economy and Finance to oversee and manage the comprehensive performance of the Korea Climate Action Fund across its four key areas effectively.
   * Four key areas: ① reduction of greenhouse gas emissions, ② fostering a prospective and low-carbon industry, ③ just transition ④ laying the foundation for carbon neutrality