The amount the government pays on behalf of companies for part of the loan interest they bear when investing in decarbonization facilities will rise to 3 trillion won this year. The Ministry of Climate, Energy and Environment announced on January 18 that it had set the interest subsidy for new loans under the 2026 green policy finance promotion program at this level. Last year's support came to 1.5550 trillion won, roughly doubling in a single year. Procedures for measuring after the fact whether this money translated into actual greenhouse gas reductions were not included in this announcement.
An interest subsidy is an arrangement in which the government or a public institution takes on a set portion of the loan interest. For companies, the burden of repaying principal and interest falls by that much, and for the government, it can move a larger volume of private capital with less public money than direct subsidies require. In investments with long payback periods, such as equipment replacement, a 1 percentage point difference in interest rates adds up to a considerable sum over 10 years.
Two conditions must be met to receive support. One concerns the nature of the business: the company must be engaged in work that contributes to domestic greenhouse gas reductions, such as green economic activities or international reduction projects. The other concerns the use of the funds: the preferential rate applies only to loans taken out as facility funds from banks that have signed agreements with the Climate Ministry. Six banks have such agreements: the Korea Development Bank, Shinhan, NongHyup, Kookmin, the Export-Import Bank of Korea and Woori Bank.
Loan terms run up to 10 years, with a ceiling of 2 trillion won per business group. On top of that, if a large company applies together with partner small and mid-sized firms, the per-group ceiling rises by up to 30 percent. The interest support ratio for small and mid-sized firms is up to 50 percent of the bank's preferential rate. For large companies, up to 30 percent of the preferential rate applies, capped at 0.5 percentage points.
The procedure begins with a reduction plan. A company submits a reduction plan when applying for a loan, and the preferential rate is set only after the bank has the plan verified through an outside body. Starting this year, this step differs by size. Loans of 10 billion won or less will not undergo separate external verification and will instead go through the financial institution's own green lending verification procedure.
Simplification cuts both ways. The threshold comes down, given that verification costs and the time required have acted as a barrier to entry for small firms. On the other hand, as verification shifts toward the banks issuing the loans, the incentive to scrutinize how conservatively the reduction figures in a plan were calculated may weaken. It has not been disclosed how closely banks' green lending verification corresponds to external verification.
The program's success or failure rests on how far apart the reduction figures written in loan plans turn out to be from actual reductions once the facilities are running. Support is decided on the basis of the plan submitted at the time of the loan, but this announcement does not confirm procedures for measuring and reporting at set intervals whether actual emissions fell as planned once the facilities began operating, or any mechanism for withdrawing the preferential rate when targets are missed. Suh Young-tae, director general for green transition policy at the Ministry of Climate, Energy and Environment, said the ministry would expand support and ease the procedural burden on small and mid-sized firms.
The next checkpoint comes at the end of this month. Branches of the six participating banks will open inquiry desks for the loan products, and the product brochures released then will show how specifically the reduction plan forms and verification criteria are laid out. Comparing how the 3 trillion won was divided among facility investments and how many tons emissions fell as a result will take more time.
