South Korea launches a major CCU project with LG Chem and POSCO to convert industrial CO2 into sustainable fuels.
South Korea has launched a landmark public-private initiative aimed at transforming carbon dioxide emissions from industrial facilities into valuable low-carbon fuels and chemical feedstocks. The project, known as the Carbon Capture and Utilization (CCU) Mega Project, was officially introduced by the Ministry of Science and ICT on June 24 at the Korea Institute of Energy Research (KIER) in Daejeon. The initiative brings together government agencies, research institutions, and leading industrial companies including LG Chem and POSCO Holdings to accelerate the commercialization of carbon utilization technologies.
The CCU Mega Project represents one of South Korea’s most ambitious climate and industrial innovation programs. It focuses on capturing carbon dioxide emissions generated by carbon-intensive sectors such as thermal power generation and steel manufacturing and converting them into high-value products including sustainable aviation fuel (e-SAF), methanol, synthesis gas, and environmentally friendly marine fuels. The government plans to invest approximately 238 billion won (around USD 158.6 million) between 2026 and 2030 to support technology development, pilot demonstrations, and commercialization activities.
LG Chem has been selected as the lead organization for the power generation segment of the project. The company will focus on developing and demonstrating technologies that utilize carbon dioxide emitted from thermal power plants as a feedstock for producing sustainable aviation fuel. The initiative aligns with growing global demand for low-carbon aviation fuels as airlines and governments seek pathways to reduce emissions from air transportation.
Meanwhile, POSCO Holdings will spearhead efforts within the steel industry. The company aims to establish and demonstrate technologies capable of converting carbon emissions from steel manufacturing processes into synthesis gas and cleaner marine fuels by 2030. These products could play a significant role in reducing the carbon footprint of hard-to-abate industrial sectors while creating new value from captured emissions.
Prior to the project's official launch, the Ministry reviewed progress achieved in Direct Air Capture (DAC) technologies, which remove carbon dioxide directly from the atmosphere. In addition, advancements in synthetic crude oil production technologies were examined. These technologies convert captured carbon dioxide and hydrogen into crude-oil-like products that can serve as alternative feedstocks for fuel and chemical production.
The Korea Institute of Energy Research is actively working to scale up synthetic crude oil conversion technology and has set a long-term objective of enabling annual production of approximately 900,000 tons of synthetic crude oil by 2040. This process utilizes captured carbon dioxide combined with hydrogen to create a renewable alternative to conventional fossil-derived crude oil.
Government officials believe widespread deployment of CCU technologies could significantly strengthen South Korea’s energy security. By replacing a portion of imported fossil-based fuels and raw materials with domestically produced alternatives, the country could reduce its dependence on overseas energy resources and improve supply resilience.
According to projections based on anticipated technology adoption rates, CCU solutions could replace roughly 10% of aviation fuel demand and as much as 48% of synthesis gas requirements by 2050. Such adoption would contribute meaningfully to decarbonization efforts while fostering the growth of new industrial value chains.
The Ministry emphasized that CCU technologies are essential for achieving South Korea’s greenhouse gas reduction commitments under its Nationally Determined Contribution (NDC) targets. The technology is expected to help reduce emissions across sectors including power generation, steelmaking, and petrochemicals. To further accelerate progress, the Ministry plans to allocate an additional 22.4 billion won in supplementary funding, including 4.2 billion won during the current year, partly to address resource security challenges stemming from geopolitical uncertainties such as conflicts in the Middle East.
Ji Eun-hwan, Director of the Fusion Energy and Environmental Technology Division at the Ministry of Science and ICT, reaffirmed the government's commitment to expanding research, development, and demonstration activities through close collaboration with industry partners. He emphasized that continued support and investment will be provided to help establish a competitive and vibrant CCU industry in South Korea.
Impact on Products & ChemAnalyst-Tracked Chemical Commodities
The LG Chem–POSCO CCU mega project will primarily affect methanol, synthesis gas (syngas), hydrogen, and sustainable aviation fuel (e-SAF) — all actively tracked by ChemAnalyst. In the near term (2026–2030), the project remains in the demonstration phase, so direct price impacts will be limited. However, increased R&D and procurement activity could create mild upward pressure on green hydrogen and CO2 capture-related chemicals.
As methanol-to-jet projects globally already represent around 1.8 million tonnes per year of future SAF capacity, growing supply from CCU routes could gradually soften conventional methanol prices by diversifying feedstock sourcing away from fossil fuels. On the marine fuel side, POSCO's push into synthesis gas and eco-friendly marine fuel aligns with rising green methanol demand in shipping, potentially tightening supply and offering short-term price support for methanol. Overall, this project signals a structural long-term shift — bearish for conventional crude-derived jet fuel and naphtha, while bullish for green hydrogen and CO2-based chemical intermediates tracked by ChemAnalyst.
