*4.1. Projected Emissions at the Baseline*

Table 4 summarizes projected emissions at the baseline (REF). It compares emissions from GCAM-Korea and those from the national emissions inventory. The projected emissions are captured fairly well in terms of sectors and provinces. The NH3, NOx, PM2.5, SOx, and VOC emissions in 2015 are projected as 80%, 94%, 97%, 81%, and 129% respectively, compared to emissions in the emissions inventory. In REF, the LDV4W and truck sectors are the main contributors to PM2.5 emissions. The truck sector in particular accounted for 71% of NOx emissions while the LDV4W sector accounted for 98% of the total NH3 emissions.

Projected emissions by year and province are given in Figure 4. Sectoral emissions are projected between 72% and 119% compared to emissions in the emissions inventory except for VOC for LDV2W (456%) and NOx for LDV4W (53%). VOC emissions for LDV2W are overestimated because of the abrupt decrease in emissions reported in the national emissions inventory. Its emissions in 2015 (2.96 Gg) fell by 80% as compared to emissions in 2013 (15.25 Gg), whereas energy use for LDV2W increased slightly from 484 KTOE in 2013 to 514 KTOE in 2015. For a similar reason, NOx emissions for LDV4W cannot be captured well. Its emissions in the emissions inventory have dramatically increased since 2014, when it was more than two times the emissions in 2010.


**Table 4.** Comparison of emissions from the national inventory and those from GCAM-Korea (2015).

<sup>1</sup> Note: PM2.5 of LDV2W is indicated in 2016 because of no data for 2015.

**Figure 4.** *Cont*.

**Figure 4.** Projected emissions from the baseline (REF) compared to the national emissions inventory. Note: (**a**) Trend of the projected emissions and (**b**) projected emissions by provinces in 2015.

The REF scenario shows that projected emissions in the future are on a downward trajectory because of fuel switching from refined liquids to natural gas (NG), electricity, and hydrogen (see Figure 5b,c). The trends in NOx and PM2.5 emissions for the truck sector show a steeper decline than that for other sectors. The difference in emissions between 2020 and 2040 is 1446 tonnes of PM2.5 and 47,050 tonnes of NOx. The LDV4W sector, a major contributor to NH3 emissions, is expected to reduce 860 tonnes of NH3 emissions from 2020 till 2040.

As mentioned earlier, Seoul and Gyeonggi, a populous urban area with the highest number of vehicles [50], are expected to have most of the air pollutant emissions from all road transportation sectors. The truck sector in particular produces large emissions in Gyeonggi. In this province, annual VKT of trucks is the highest among all provinces because of the massive road freight volume due to the manufacture of plastics and synthetic rubber [51].

The second most polluted area is Gyeongsang province (Gyeongbuk and Gyeongnam), since this province is the second most populous province next to the Seoul metropolitan area which accounted for 12% of the whole population of South Korea in 2015. In this province, energy consumption by trucks accounted for 16% of the total truck energy consumption, serving a huge industrial complex in this region.

**Figure 5.** Service demand in the road transportation sector. Note: Total service demand: (**a**), Technology share (**b**), Service demand of ICEVs (**c**). The rest of the percentage of bars in (**b**) is the share of service demand for refined liquid vehicles.

#### *4.2. ZEVs Promotion Using the Subsidy Policy*

The ZEV subsidy increases ZEVs' service demand in all the sectors (Figure 5b) while total transportation service demand is kept almost the same (Figure 5a), showing only around 0.1% difference depending on the scenarios. BEVs' service demand noticeably increases in the LDV4W sector, since LDV4W is the main target of subsidy support. In the Sunset scenario, the share of service demand for BEVs and FCEVs is expected to be 2.6% and 0.2% respectively in 2025. In 2040, the share of BEVs and FCEVs increases to 5.3% and 1.2% respectively. REF's share is 0.8% for BEVs and 0.03% for FCEVs in 2040. The share for BEVs rises further to 14.4% in 2040 if the current subsidy is maintained till 2040 (the NoSunset case), while the share of FCEVs starts decreasing to around 1% despite the same amount of subsidy. Even if FCEVs receive the same subsidy, their market entry is disturbed by the introduction of BEVs considering the total service demand, which does not change significantly.

On the other hand, other vehicles excluding LDV4W, show minor effects on service demand change. As NG vehicles dominate service demand in the truck and bus sectors, ZEVs' share is less than 1% even in 2040. Besides, ICEVs' service demand increases in the bus sector with the ZEV subsidy, that is, there are intensive share increases in ZEVs' share in the LDV4W sector leading to an increase in its service demand and average service costs at the same time, while bus service costs become relatively cheaper. The reason for the increase in LDV4W sector's service costs is high-cost technologies (BEVs and FCEVs) being introduced in this sector. In 2040, the relative service cost of the bus sector is 0.80 in the Sunset case and 0.81 in the NoSunset case based on the LDV service cost of 1. By the price

response, bus service demand increases by 0.3–0.7% compared to REF and increases further in the Sunset case (Figure 5c).

Demand for electricity and hydrogen increases with the growth of BEVs and FCEVs' service demands. In the Sunset case, electricity demand increases from 9.7PJ (REF case) to 12.2PJ in 2025, and from 16.1PJ (REF case) to 18.8PJ in 2040. In the NoSunset case, it further increases to 13.2PJ in 2025 and 31.3PJ in 2040. In the case of hydrogen demand, while the REF case shows the demand at 0.05PJ even in 2040, demands increases to 0.4PJ in 2025 and 2.3PJ in 2040 in the Sunset case. The NoSunset case shows the demand decreasing rather than increasing as compared to the Sunset case, which is 0.4PJ in 2025 and 1.9PJ in 2040, because of a decrease in FCEVs' service demand. Changes in the prices of electricity and hydrogen are negligible ranging between 0.0% and 0.3% during the period.

Figure 6 shows the estimates of a cumulative number of ZEVs and a comparison with the government's target for ZEV promotion. According to CPFDM, the goal is to have 850,000 BEVs and 150,000 FCEVs by 2024. In the Sunset case, the total number of vehicles is estimated to be approximately 313,000 BEVs and 22,000 FCEVs in 2025. BEVs and FCEVs are expected to be 3 times and 44 times more than the REF case respectively. In the NoSunset case, it is estimated at 399,000 BEVs and 21,000 FCEVs, which is a 22% increase and 3% decrease respectively compared to the Sunset case. But both scenarios fail to achieve the government's target of ZEV promotion.

**Figure 6.** Estimates of the cumulative number of ZEVs by sector (**a**) and by province (**b**).

In the Seoul metropolitan area, the cumulative number of BEVs is estimated at 128,000 in 2025, which accounts for 41% of the total BEVs. In 2040, BEVs in this area are estimated at 307,000 in the Sunset case and 738,000 in the NoSunset case. FCEVs are mostly promoted in provinces where local subsidies are provided and not in the Seoul metropolitan area. Accordingly, Gangwon, where the

largest subsidy for FCEVs is provided, is the second most diffused province. In Gangwon, the estimated number of FCEVs is 2900 in 2025 in the Sunset scenario. Chungnam and Gyeongnam follow with 1900 FCEVs each.

Table 5 summarizes the required subsidy for meeting the ZEVs scenarios from 2020 to 2040. It is estimated that total subsidy required during the period will be approximately \$9.6 billion in the Sunset case and \$24.7 billion in the NoSunset case. Above all, around 90% of the total subsidy spending is concentrated in the LDV4W sector.


**Table 5.** Required subsidy by scenarios (unit: Million \$).

Note: Required subsidy is calculated as the average purchase subsidy multiplied by the increase in the number of vehicles during the 5-year period.
