South Korea’s economy could face severe long-term consequences if it fails to adequately address the climate crisis. (Image courtesy of Yonhap)
SEOUL, Nov. 5 (Korea Bizwire) – South Korea’s economy could face severe long-term consequences if it fails to adequately address the climate crisis, with projections showing an annual growth rate decline of 0.3 percentage points and a 21% drop in GDP by 2100, according to a new report from the Bank of Korea.
The central bank emphasized in a policy note released on November 4 that South Korea must accelerate investments in low-carbon technology development and commercialize greenhouse gas reduction technologies across its manufacturing sector to mitigate these risks.
Without any climate response measures, the report projects that average temperatures could rise by 6.3 degrees Celsius and precipitation could increase by 16% compared to current levels. These changes would significantly impact economic growth, with the most severe effects manifesting after 2050.
However, the analysis suggests that implementing strong climate responses to limit global temperature rise to 1.5°C could substantially reduce the economic impact. Under this scenario, GDP would decrease by 13.1% by 2050 compared to the baseline scenario, before moderating to a 10.2% reduction by 2100.
The annual growth rate would decline by 0.14 percentage points, approximately half the reduction projected under the no-response scenario.
The report also highlights significant implications for inflation. Producer prices are expected to rise 1.8% above baseline projections by 2100 without climate action.
Paradoxically, under the 1.5°C scenario, producer prices could rise even higher, reaching 1.9% above baseline by 2100, primarily due to increased production costs associated with carbon pricing policies.
Industry-specific impacts vary significantly. Key sectors including oil refining, chemicals, cement, steel, automotive, and power generation could see their value-added decrease by 62.9% compared to the baseline scenario by 2050 under the 1.5°C response scenario, before recovering to a 32.4% reduction by 2100.
Agriculture, food manufacturing, construction, real estate, and restaurant industries appear particularly vulnerable to chronic risks from climate change. Without intervention, these sectors could see their value-added decline by 33.4% by 2100, compared to a modest 1.8% reduction by 2050.
The bank also projects that extreme weather events could inflict substantial economic damage. By 2100, typhoon-related damages could reach 9.7 trillion won, while flood damages could amount to 3.2 trillion won if no climate action is taken.
“Early strengthening of greenhouse gas reduction policies is the most advantageous strategy for South Korea’s economy in the long term,” the Bank of Korea concluded, while noting that these projections are based on NGFS (2023) growth trajectories and should not be interpreted as definitive economic forecasts.
M. H. Lee (mhlee@koreabizwire.com)
