Green Policy Finance in 2026: What Grew and by How Much
Ask a manufacturing SME why it keeps postponing an abatement investment, and the answer is usually the same: the interest burden hurts more than the equipment price. The Ministry of Climate, Energy and Environment's Green Policy Finance Activation Program has the government cover part of that interest. For 2026, the interest subsidy for new loans totals KRW 3 trillion, up from KRW 1.55 trillion in 2025, so it has nearly doubled.
The mechanism is simple. Companies pursuing green economic activities or international mitigation projects that cut domestic greenhouse gas emissions get a preferential rate when they borrow facility funds from a partner bank (KDB, Shinhan, NongHyup, KB Kookmin, Korea Eximbank, or Woori). Two related tools run in the same year:
Other programs cover equipment-specific loans (such as factory rooftop solar), bank screening standards (the transition finance guidelines), or grants (the carbon-neutral equipment program). This article is about an interest-support finance tool.
Two Changes That Matter for SMEs and Mid-Sized Firms
1. Simplified verification for loans of KRW 10 billion or less
For loans of KRW 10 billion or less, the separate external verification of the reduction plan is simplified. Verification cost and time used to be a real hurdle for small firms replacing equipment worth a few hundred million to a few billion won. That hurdle is now lower.
2. Green ABS interest support
When the underlying assets are SME loans, the government covers 3 percentage points of the issuance rate in year one. For mid-sized firms, it covers 2 percentage points. In years two and three, support is around 50% of the year-one amount. SMEs whose credit is too weak to issue green bonds on their own can still reach bond-market funding by joining a securitization pool that bundles loans from many companies.
Application windows and remaining limits differ by round and by bank, so always check the latest notice.
Does Your Investment Qualify as a Green Economic Activity?
Check K-Taxonomy eligibility in this order:
Activities that often apply to manufacturing SMEs include high-efficiency equipment replacement, fuel switching, waste heat recovery, and on-site renewable energy. Look up each activity's thresholds in the original guideline. Applications most often fail because of weak evidence for the reduction estimate, no baseline against existing equipment, or green funds mixed with other uses.
Preparing the Reduction Plan and Post-Loan Reporting
If your data is thin, build the foundation first through existing programs such as free facility-level GHG inventory support. After the loan is disbursed, you will need to report how the funds were used and what was reduced. Check the loan agreement in advance to see whether missing these reports could cost you the preferential terms.
Combining Grants and Interest Subsidies
You can cover part of the investment with a carbon-neutral equipment grant and fund your remaining share with a green policy loan. However, some programs may restrict duplicate support, so confirm this before you apply.
Example scenario (assumed figures): A firm invests KRW 2 billion in waste heat recovery and secures a KRW 600 million grant. Of the remaining KRW 1.4 billion, KRW 1.2 billion comes from a green loan at a partner bank (under KRW 10 billion, so verification is simplified) and KRW 200 million comes from the firm's own funds.
Pre-application checklist
How KITIM Can Help
KITIM offers K-Taxonomy eligibility pre-assessments, drafts reduction plans and their supporting calculations, and designs grant-and-finance combinations. If you are weighing an abatement investment, contact the KITIM consulting team to find out whether you can cut your interest costs. We will start by assessing your chances using your own equipment and energy data.