Tax Return on Saving Energy

As early as September, companies that invest in energy saving equipment or energy efficient material for buildings will get back seven percent of their investment as a tax refund.

The government, however, has decided not to lower traffic and oil import taxes on the grounds that government intervention would only lead to a distorted market and falling tax revenues.

Meanwhile, international oil prices once again hit a new record high based on concerns that Yukos, Russia’s top oil producer, may halt production.

The government held an economic ministerial meeting on Friday, chaired by Deputy Minister and Minister of Finance and Economy Lee Hun-jai, and came up with new energy policies in response to high oil prices.

The government decided to revise the Restriction of Tax Reduction and Exemption Act in order to return seven percent of investment to companies that invest in building materials with high-energy efficiency, such as direct current arc furnaces or insulation equipment. The government will also cut down interest rates of its supporting funds for Energy Service Companies (ESCO) from the current 5.25 percent to three percent.

Beginning in the second quarter of next year, power-generating companies will be obliged to produce renewable energy with the revision of an energy law.

Many private-sector experts, however, point out that the government’s new energy policies might not address the current problems since they focus on medium and long-term results. They said short-term measures, like traffic tax reductions, are needed to ease the burden of the ordinary people.

The spot price for West Texas Intermediate (WTI) at the New York Mercantile Exchange (NYMEX) on August 5 was up $1.70, to hit a new record high of $44.40 per barrel, Korea National Oil Corporation (KNOC) reported.

The price of WTI for September delivery closed at $44.41, up $1.58 from the previous day. It is the record closing price since crude oil began futures trading on the NYMEX in 1983.

The price of the North Sea’s Brent crude oil for September delivery hit a record peak at $41.12, up $1.42 from the day before, at London’s International Petroleum Exchange (IPEX).

The price of Dubai crude fell $.70 to close at $37.01, but the 10-day average price of Dubai oil recorded $36.15, exceeding the $36 mark for the first time.

Chi-Young Shin Kwon-Heui Hong higgledy@donga.com konihong@donga.com