Energy Efficiency Policy Loan Rate Cut from 2.5% to 2%... Corporate Interest Burden Reduced by 5 Billion Won

The policy loan interest rate supporting corporate energy efficiency investments will be lowered by an additional 0.5 percentage points. The variable interest rate applied to small and medium-sized enterprises (SMEs) and nonprofit corporations will drop from 2.5% per annum to 2.0% per annum, which is expected to reduce annual interest costs for supported companies by approximately 5 billion won.

On October 5, the Ministry of Climate, Energy and Environment announced that, in order to reduce companies’ financial costs and promote energy efficiency investments, it has lowered the loan interest rate for the Rational Energy Utilization Fund by 0.5 percentage points starting October 1.

Yonhap News

The Rational Energy Utilization Fund is a policy-based loan program that provides long-term, low-interest funding to support the installation of energy-saving facilities by companies and investments by Energy Service Companies (ESCOs). The support budget for this year amounts to a total of 276.5 billion won.

As a result of this measure, the variable interest rate applied to energy-saving facility installation projects by SMEs and nonprofit corporations, as well as ESCO investment projects, has been reduced from the previous 2.5% per annum to 2.0% per annum. The original plan was for the third quarter rate this year to be 2.25%, with an increase to 2.5% scheduled for the fourth quarter. However, the Ministry has decided to apply a reduced rate of 2.0% instead of increasing the rate.

The Ministry explained that, prior to amending or enacting any related regulations, the reduced interest rate would be applied starting in the fourth quarter of this year following a review by the Proactive Administration Committee. This measure aims to alleviate the increased financial burden on companies resulting from recent interest rate hikes and to prevent a decline in energy efficiency investments.

The evaluation criteria for policy financing will also change. The Ministry will revise the “Detailed Criteria for Financial Support for Rational Energy Utilization Projects” so that social economy enterprises and small and medium-sized businesses with outstanding performance in environmental, social, and governance (ESG) management will receive additional points in the evaluation process when applying for loans.

Oh Ilyoung, Policy Chief of the Climate Energy Policy Office, stated, “We hope this rate reduction will help ease the financial burden on SMEs and other organizations, while providing momentum to expand investments in energy efficiency. We will further strengthen policy finance support by reflecting on-site needs to sustain corporate energy efficiency improvements and investments in greenhouse gas reduction.”

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