[2027 Budget] Climate Ministry Sets Record 25.7 Trillion Won... EV Supply Expanded to 430,000 Units

2.1 Trillion Won for EV Subsidies, Up 32.8%
1.9 Trillion Won for Power and Water Infrastructure in Advanced Industries

The Ministry of Climate, Energy and Environment has set next year’s budget at a record-high 25.73 trillion won, focusing fiscal resources on the green transition by increasing the supply of electric vehicles from 300,000 this year to 430,000 next year, and expanding the related budget to 2.14 trillion won. Additionally, 1.9 trillion won will be invested in power and water infrastructure for mega-projects.

On September 1, the Ministry announced that the 2027 budget proposal, containing these measures, had been approved by the Cabinet. The total expenditure for next year is set at 25.7319 trillion won, an increase of 3.9737 trillion won, or 18.3%, compared to this year.

On June 4, visitors participating in 'EV Trend Korea' held at COEX in Gangnam-gu, Seoul, are viewing various electric vehicles displayed at the event venue. 2025.6.4. Photo by Kang Jin-hyung

2.1 Trillion Won for EV Subsidies... Supported Volume Expands from 300,000 to 430,000 Units

The budget for electric vehicle supply will increase to 2.1403 trillion won next year, up 32.8% from this year’s 1.6114 trillion won. The number of subsidized vehicles will be expanded from 300,000 to 430,000 units, and a conversion subsidy will also be introduced for commercial vehicles such as taxis. The budget for electric two-wheeler supply will also increase by 43.8% to 23 billion won, compared to 16 billion won this year. In particular, the additional support rate for delivery electric two-wheelers will rise from 10% to 50%.

In line with expanded EV supply, the government will adjust the subsidy system. While the upper limit for individual consumption tax reduction for passenger vehicles will decrease from 3 million won to 2 million won next year—resulting in reduced tax benefits for high-priced EVs—the Ministry aims to minimize any resulting slowdown in EV adoption. A Ministry official explained, "As tax benefits decrease, we have coordinated with the Ministry of Economy and Finance to compensate with additional fiscal support through EV subsidies."

Due to the reduction in the individual consumption tax benefit, only electric vehicles priced above approximately 55 million won are expected to be affected. Considering that the average EV purchase price is around 50 million won, the change will mainly impact higher-priced models. Regarding issues with securing local government subsidy resources, the Ministry plans to revise and announce its subsidy policy by the end of the year.

The budget for electrifying heat energy—converting fossil fuel–based heating and thermal demand to electricity—will increase by 447.1%, from 15.7 billion won to 85.9 billion won. The project, previously focused on detached houses, will expand to include pilot programs for apartment complexes. Financial support for the industrial sector’s green and low-carbon transition will also grow from 8.7 trillion won to 10.6 trillion won. New initiatives include support for transition bonds and green municipal bonds to help high greenhouse gas-emitting industries shift to low-carbon alternatives.

1.9 Trillion Won for Power and Water Infrastructure Including AI Data Centers

The government will proactively expand power and water infrastructure to strengthen the competitiveness of advanced industries such as semiconductors and artificial intelligence (AI) data centers. The related budget totals 1.9351 trillion won, with 1.5489 trillion won allocated for the electrical sector and 386.2 billion won for the water sector.

In the electricity sector, 65.8 billion won will be invested in demand-attracting substations to preemptively construct power infrastructure in regions outside the Seoul metropolitan area. A total of 572.4 billion won will be allocated to build transmission endpoint energy storage systems (ESS), and 36 billion won for facilities to stabilize electrical quality. Additionally, 2.7 billion won and 19.6 billion won will be earmarked for underground cabling and joint offshore wind connection facilities, respectively, to support grid interconnection of renewable energy.

In water supply, 119.6 billion won will be invested to provide water to semiconductor industry complexes in the Honam region, and 8.1 billion won for advanced industry water supply in the Chungcheong region. To ensure stable water supply, 250 billion won will be allocated as a contribution to Korea Water Resources Corporation, and 8.5 billion won will be invested in wastewater treatment for semiconductor complexes in Honam.

The financial support budget for the energy transition to renewables will increase by 133.1%, from 648 billion won this year to 1.5108 trillion won next year. The budget for factory rooftop solar loans will expand 4.4 times, from 122.9 billion won to 544 billion won. The renewable energy supply support budget will also grow by 38.5%, from 214.3 billion won to 296.7 billion won, while 75 billion won will be invested to expand support for residential solar projects from 100,000 to 200,000 households. The budget for developing core renewable energy technologies will increase by 43.2%, from 143.7 billion won to 205.8 billion won. Funding for small modular reactor (SMR) manufacturing will also expand from 18.8 billion won to 23.5 billion won.

(After the work report on the 4th, embargoed) Sung-Hwan Kim, Minister of the Ministry of Climate, Energy and Environment, is speaking before the pre-briefing on the climate ministry’s work report for the second half of 2026 at the Seoul Government Complex Annex in Jongno-gu, Seoul on July 3, 2026. Photo by Yongjun Cho

Expanded Response to Climate Disasters such as Algal Blooms and Floods

Spending to prevent urban flooding around Gangnam Station, Gwanghwamun, and Dorimcheon will increase by 268.8%, from 22.1 billion won this year to 81.5 billion won. Two mobile seawater desalination facilities will be newly introduced for drought response, with a related budget of 3 billion won. Investment in water quality improvement, including measures against algal blooms, will increase by 74.7% to 598.6 billion won. The government will launch a new national intensive algae control program for key water systems such as the Nakdong River, Daecheong Lake, and Soyang Lake, allocating 104.8 billion won. The budget for real-time algae monitoring will also rise 69.1%, from 27.2 billion won to 46 billion won, and spending for social overhead capital (SOC) including nonpoint pollution reduction and livestock manure treatment facilities will expand from 315.4 billion won to 395.6 billion won.

Government contributions for compensation to victims of humidifier disinfectant will increase sharply, from 10 billion won to 244.7 billion won. Additionally, 3.5 billion won will be newly allocated for the temporary care and overseas transfer of captive bears, and 9 billion won for the establishment of protection and nature learning facilities for bears in Woraksan National Park. The government will also restructure the resource allocation for energy transition and green transition. The energy segment of the Energy and Resource Business Special Account will be consolidated into the Climate Response Fund, and the Electric Power Industry Infrastructure Fund will be restructured to focus on renewable energy supply and technology development.

This content was produced with the assistance of AI translation services.