2.9057 trillion won. That is the size of the Climate Response Fund for 2026. It is the largest amount since the fund was set up in 2022, and authority over managing and operating this money passed from the Ministry of Economy and Finance to the Ministry of Climate, Energy and Environment as of January 2. This is the first year that the hand drawing up climate finance and the hand making climate policy sit inside the same ministry.
On January 4 the climate ministry announced the creation of a Climate and Energy Finance Division to take exclusive charge of managing and operating the fund. The division will draw up the fund's mid to long term operating plan and its annual operating plans, and run the performance management system. It is a follow-up measure to the government reorganization announced last September.
The Climate Response Fund is a statutory fund created in 2022 under the 「Framework Act on Carbon Neutrality and Green Growth for Coping with the Climate Crisis」. Its stated purpose was to cut greenhouse gases and to finance responses to the climate crisis. Until now the Ministry of Economy and Finance handled overall management, while 16 ministries and agencies including the climate ministry, the Ministry of Trade, Industry and Energy, the Ministry of Land, Infrastructure and Transport, the Ministry of Employment and Labor and the Korea Forest Service split the actual execution of projects.
This dispersed way of operating has been cited as the fund's weak point. In its 2024 report
A look at the fund's revenue sources makes this year's change clearer. The fund is filled by revenue from paid allocation of greenhouse gas emissions permits, transfers from the transportation, energy and environment tax (7% of the tax revenue), transfers from other accounts and funds, and deposits from the Public Capital Management Fund. Among these, revenue from selling emissions permits slid from 730.6 billion won in 2022 to 400.8 billion won in 2023 and 289.7 billion won in 2024, and stood at 348.7 billion won on the basis of the 2025 draft plan.
Under this year's plan, paid allocation revenue is 765.1 billion won, or 26.3% of total revenue. That share is close to double last year's 13.3%. The paid allocation ratio in the industrial sector is around 15%, and free allocation continues until 2030 for high-emitting sectors such as steel and cement. It means the fund's money supply is tied more tightly to the emissions trading market.
The operating principle the climate ministry has put forward is selection. It will concentrate money on projects whose greenhouse gas reduction effects have been verified through performance evaluation. The plan is to grow the resources further through expanded own revenue from the higher paid allocation ratio and through issuing green government bonds, and to spend the money secured on core projects with large reduction effects, such as support for corporate decarbonization, and on large-scale research and development. Oh Il-young, head of the Climate and Energy Policy Office, said the transfer of responsibilities and the creation of a dedicated organization have laid the groundwork for combining policy expertise with financial management capacity.
Even with a change in the ministry overseeing the fund, of course, the execution of individual projects remains with the ministries in charge. With management and execution divided, how performance responsibility will be enforced, and what sanctions actually follow for underperforming projects, has not been made clear. For the principle of focusing on projects with verified reduction effects to translate into budget adjustments, the evaluation indicators and cycle need to be disclosed.
How the 2.9057 trillion won is allocated by sector and in what amounts is another item to check through the year. The measure that grades the fund's report card is the volume of emissions cut. The Climate Response Fund's operating plan is a document published every year, so if you look up once this year which projects your taxes and the emissions permit revenue have been loaded onto, you can score for yourself a year from now whether this promise was kept.
