The South Korean government will sharply ease fees for importing liquefied natural gas (LNG) in addition to the sales tax cut, making its taxes cheaper than coal to spur the migration to cleaner fuel in an effort to fight the worsening air pollution.

The Ministry of Trade, Industry, and Energy proposed to axe the surcharge on LNG imports to fuel power generators from the current 24.2 won ($0.02) to 3.8 won per kilogram. The revised tax code was approved by the state council and would go into effect on Apr. 1.

The move is expected to boost the use of LNG, which had so far been levied with heavier taxes than fossil fuel.

Due to its low emissions, LNG’s environmental costs are half those of bituminous coal. But its total tax levies, including special consumption tax, import surcharge and tariffs, had been 91.4 won, more than double the 36 won of bituminous coal.

The cut in LNG’s import surcharge on top of the eased special tax in July last year would bring the total levy of LNG to 23 won from the previous 91.4 won, while that of thermal coal would go up to 46 won from 36 won in line with its pollutant emissions.

The government estimated the new taxes to help reduce an annual 427 tons of ultrafine particulate matter, tiny dust particles less than 2.5 micrometers in diameter that are absorbed directly into the blood stream and are known to pose serious health risks.

LNG used in cogeneration plants, or combined heat and power plants, would enjoy full tax reimbursement as they operate at significantly higher energy efficiency, about 30 percentage points higher than traditional power plants. Personal and collective energy operators as well as fuel cell generation plants would be eligible for the tax refunds, with those of installed capacity of less than 100 megawatts to see tax cuts of 6.9 percent from Apr. 1.

Korea currently relies 40 percent of its electricity supply on coal. LNG accounts for less than 20 percent. Nuclear reactors make up 30 percent and renewable sources, like solar, wind and fuel cell, about 10 percent.

By Lim Sung-hyun and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]