Ill.In-depth AnalysisThe Path to a Carbon Neutral Economy:Current Statusand Challenges of Korea's Climate Technologies(Economic Research Institute)Dongweon Lee,Won Sung,Seri Shim,Inro Lee,Seongjun Jeong,Eseul Choi,Dongjae Kim,Tae Hyoung ChoKEY TAKEAWAYS1As the global demands for addressing the climate crisis and building asustainable economy intensify,the importance of climate technologies isbecoming prominent in the transition to a carbon neutral economy wherecarbon emissions are 'zero'.Climate technologies are technologies thatreduce greenhouse gases and adapt to climate change while generatingeconomic returns,serving as a key element supporting the transition tocarbon neutrality.Climate technology innovation provides opportunities tominimize economic contraction and create new growth engines during thetransition to a carbon neutral economy.2 Comparing major countries'climate technology innovation performancebased on patent application numbers,Korea showed quantitativelyfavorable results.Analysis of patents registered with the U.S.Patent andTrademark Office shows that Korea's climate technology patent applicationsranked third globally between 2011-21,placing it among the world's toptier.Moreover,while the United States and Japan have shown stagnation ordecline since the early to mid-2010s,Korea has continued to increasesteadily until recently.3 However,Korea's climate technology patents were concentrated in specificcompanies and technologies,and showed insufficient qualitativeperformance in terms of subsequent impact,originality,and generality.More than two-thirds of climate technology patents were concentrated infour companies and four technology areas:secondary batteries,electricvehicles,renewable energy,and information and communication technology.Conversely,patent performance was poor in carbon reduction technologiesfor carbon-intensive industries such as chemical,oil refining,and steel,aswell as in core promising technologies like Carbon Capture,Utilization,andStorage (CCUS).Additionally,even in core technology areas like secondarybatteries,electric vehicles,and renewable energy,most qualitative patentevaluation indicators remained in the lower ranks among the top 10leadingcountries(countries with the highest numberofpatentapplications).4 The reasons for Korea's climate technology innovation performance beingconcentrated in specific companies and technologies,and showinginsufficient qualitative performance,were analyzed as follows:First short-term performance is being prioritized over mid-to long-termnecessity in climate technology innovation.Korea's climate technology hasfocused on areas that have already entered commercialization stages andshow steady market growth,enabling quick investment returns,such assecondary batteries,electric vehicles,and renewable energy.Thesetechnology areas accounted for 65%of corporate climate technology R&Dexpenditure in 2022,while CCUS,a core promising technology,accountedfor only 1%.Additionally,the lack of long-term investment in basicresearch,which forms the academic foundation for new technologydevelopment,has contributed to lower qualitative performance,showingfewer patent citations compared to the top 10 leading countries.5 Second,govemment R&D support and carbon pricing policies are notsufficiently inducing climate technology innovation from a mid-tolong-term perspective.The government's R&D investment ratio inlow-carbon energy technology was 2.9%in 2021,ranking lowest among thetop 10 leading countries excluding China.Furthermore,the effective carbonrates,including emission permit price,was significantly lower at 26.0euros/tCO2 in 2023,compared to the top 10 leading countries'average(64.7 euros/tCO2).6Third,climate technology innovation financing conditions for new smalland medium-sized enterprises are inadequate.Korea's green bond issuancevolume has increased significantly since 2021,but at 0.30%of GDP during2016-23,it was considerably lower than the top 10 leading countries'average (0.57%).Additionally,venture capital investment in climatetechnology during the same period was 0.003%of GDP,the second-lowestamong the top 10 leading countries (average 0.019%)after Japan.