Korean Lawmakers Urge IRA-Style Production Incentives to Counter Global Competition

Korean industry groups and lawmakers are calling for a new law similar to the U.S. IRA, which would provide cash incentives for producing strategic goods like batteries and solar panels.

This push is a response to powerful incentives in other countries, like the U.S. AMPC, and intense price competition from subsidized Chinese companies.

Recent financial losses at major Korean companies highlight the urgency, as current tax credits are not effective for firms that aren't profitable, risking the loss of domestic manufacturing.

A strong call for a “Korean IRA” is echoing from the National Assembly, as industry leaders push for direct cash incentives for domestic production.

This movement is driven by a critical need to stay competitive in a rapidly changing global landscape. The core proposal is to introduce a system of refundable tax credits and credit transferability. Unlike Korea's current tax breaks, which only benefit profitable companies, a refundable credit acts like a direct cash payment, or a “direct refund.” This is vital for companies experiencing temporary losses, a situation many in the battery and solar sectors currently face. Credit transferability would also allow these companies to sell their tax credits to other profitable firms, turning a future benefit into immediate cash.

Three main external pressures are forcing this issue. First is the intense policy competition from abroad. The United States’ Inflation Reduction Act (IRA) offers a powerful incentive called the Advanced Manufacturing Production Credit (AMPC), providing up to $45 per kWh for battery production. This amounts to a discount of nearly 40% on the cost of a battery pack, creating a massive pull for manufacturers to locate their factories in the U.S. Japan has also recently launched its own similar production-linked incentives, increasing the pressure on Korea.

Second, persistent price pressure from China is squeezing profit margins. Beijing’s long-term subsidies for electric vehicles and renewable energy have led to a global oversupply, driving down prices. For Korean companies to compete without similar government support is becoming increasingly difficult. Finally, growing trade uncertainty, including tariffs imposed by the U.S. and EU on Chinese goods, is pushing countries to secure their own domestic supply chains, making home-based production incentives a matter of national economic security.

The urgency is amplified by recent events at home. LG Energy Solution reported a significant operating loss for the first quarter of 2026, a clear signal that existing support mechanisms are insufficient. When a company isn't making a profit, a tax credit it can't use is worthless. This situation, combined with a strong U.S. dollar that raises the cost of imported raw materials, puts Korean producers at a distinct disadvantage, risking a “hollowing out” of the domestic manufacturing base as companies move production overseas.

Advanced Manufacturing Production Credit (AMPC): A U.S. incentive under the IRA that provides a tax credit for each unit of a clean energy component (like a battery cell) produced domestically.
Credit Transferability: A mechanism that allows a company with tax credits it cannot use (e.g., due to having no tax liability) to sell those credits to another company for cash.
Refundable Tax Credit (Direct Pay): A type of tax credit that can be paid out in cash to the recipient, even if they have no tax liability to offset. This is particularly helpful for companies that are not yet profitable.

Korean Lawmakers Urge IRA-Style Production Incentives to Counter Global Competition

Korean industry groups and lawmakers are calling for a new law similar to the U.S. IRA, which would provide cash incentives for producing strategic goods like batteries and solar panels.

This push is a response to powerful incentives in other countries, like the U.S. AMPC, and intense price competition from subsidized Chinese companies.

Recent financial losses at major Korean companies highlight the urgency, as current tax credits are not effective for firms that aren't profitable, risking the loss of domestic manufacturing.

A strong call for a “Korean IRA” is echoing from the National Assembly, as industry leaders push for direct cash incentives for domestic production.

Advanced Manufacturing Production Credit (AMPC): A U.S. incentive under the IRA that provides a tax credit for each unit of a clean energy component (like a battery cell) produced domestically.
Credit Transferability: A mechanism that allows a company with tax credits it cannot use (e.g., due to having no tax liability) to sell those credits to another company for cash.
Refundable Tax Credit (Direct Pay): A type of tax credit that can be paid out in cash to the recipient, even if they have no tax liability to offset. This is particularly helpful for companies that are not yet profitable.