Will Carbon Rules Threaten South Korea's Data Centre Growth?

South Korea's data centre and semiconductor industries could face mounting financial pressures as global carbon regulations tighten, according to a study by the Institute for Energy Economics and Financial Analysis (IEEFA). 

The research highlights how the country's limited renewable energy infrastructure could threaten its competitiveness in the AI data centre market and broader technology supply chains.

As markets worldwide strengthen carbon disclosure requirements, with increasing focus on Scope 1 and 2 greenhouse gas (GHG) emissions with plans to add Scope 3 reporting, South Korean data centre operators and chip manufacturers could encounter cost increases.

The growing risk of Carbon Border Adjustment Mechanism (CBAM) exposure and stricter sustainability mandates from global technology companies will reshape the competitive landscape for data centre infrastructure providers.

Data centre carbon intensity challenges

The IEEFA report, 'Navigating supply chain carbon risks in South Korea', examines how evolving regulations could impact semiconductor and AI industries, sectors heavily reliant on data centre infrastructure. 

As carbon taxes, emissions trading systems (ETS) compliance and CBAM directives expand, operational costs for data centre operators could rise.

South Korea's data centre sector faces particular challenges due to the country's carbon-intensive energy grid. Samsung Device Solutions, the nation's leading chip maker, recorded Scope 1–3 emissions of around 41 million tonnes of carbon dioxide equivalent (tCO2e) in 2024, creating a carbon intensity of approximately 539 tCO2e per million USD of revenue. 

SK Hynix, another major chip manufacturer operating extensive data centre facilities, had a carbon intensity of 246 tCO2e/USD million.

These figures contrast sharply with global technology companies purchasing computing capacity. Apple reported a carbon intensity of 37 tCO2e/USD million of revenue, while Amazon Web Services (AWS) recorded 107 tCO2e/USD million. 

According to IEEFA, this disparity exists because companies such as Apple and AWS have implemented global strategies to minimise GHG intensity across supply chains and have adopted clean energy use throughout their operations.

Report author Michelle (Chaewon) Kim, IEEFA's Energy Finance Specialist, South Korea says: "The inclusion of indirect GHG emissions, such as Scope 2 and 3, could substantially increase supply chain carbon risks, including investment aversion, higher carbon cost exposure, and counterparty and reputational risks.”

Supply chain vulnerability risks

International trade accounts for approximately 70% of South Korea's Gross Domestic Product (GDP), with the country maintaining strong competitiveness in semiconductor clusters and AI data centres. However, mounting supply chain carbon risks in these sectors could disrupt South Korea's economic position.

The country's lack of domestic renewable energy supplies poses problems for data centre operators. 

Global technology companies seeking to reduce their Scope 2 and 3 emissions may turn away from South Korean data centre providers if they cannot demonstrate renewable energy usage and emissions reductions, according to IEEFA.

While semiconductors are currently not included in the EU CBAM, with omissions of Scope 2 and 3, IEEFA warns that their future inclusion could create substantial expenses.

Current estimates point to approximate CBAM certificate expenses of US$588m for South Korean chip importers between 2026 and 2034.

Michelle adds: "The sharp increase in CBAM costs may prompt European importers to switch their chip suppliers from high-emission South Korean producers to low-carbon suppliers.”

Infrastructure and policy recommendations

To maintain competitiveness in the global data centre market, IEEFA outlines several critical measures for South Korea:

For data centre operators, enhanced access to renewable energy may be essential. Accelerating grid modernisation and expansion, alongside removing barriers in PPAs and the Renewable Portfolio Standard, will enable facilities to procure cleaner power sources.

Without these infrastructure improvements, South Korean data centres will struggle to meet the sustainability requirements demanded by hyperscale clients and international partners, potentially pricing the country out of crucial supply chains.