The 'escrow system' for environmental impact assessments is being tested for the first time to change the structure in which developers select assessment agencies directly. This initiative aims to reduce the so-called 'gap-eul relationship' between project developers and assessment firms by having a third party select the evaluation agency.
On October 5, the Ministry of Climate, Energy, and Environment announced that it is launching a pilot project for the escrow system to prevent false or inadequate assessments and to enhance the independence and reliability of evaluations.
The first project to be evaluated under this system is the environmental impact assessment for the modernization of the Daecheong Dam power facilities, commissioned by the Korea Water Resources Corporation. The corporation plans to announce the pilot project through its electronic procurement system on October 6.
Previously, project developers directly selected and contracted assessment agencies, raising concerns that low-cost contracts or undue demands from developers could compromise the objectivity and independence of evaluations. The escrow system allows a third party to select assessment agencies based on objective criteria, rather than the developers themselves.
In this pilot project, the Korea Environmental Preservation Agency will serve as the escrow agency. It will evaluate firms based on their technical capabilities, performance history, and administrative sanction records. The preliminary capability assessment will allocate 65 points for technical ability and 35 points for performance, with an additional 2 points available for specific merits.
The introduction of the escrow system has not been without challenges. The Climate Ministry began planning the pilot project in March and developed optimal proposals for the system in June. However, environmental groups raised concerns in May that merely having a third party select assessment agencies would not sufficiently eliminate developer influence.
There were also suggestions that the escrow agency should manage all aspects from cost deposits to procurement, contracts, inspections, and dispute resolution. Calls for increased citizen participation, expanded information disclosure, and stricter penalties for false or inadequate assessments were also made. In response, the Climate Ministry stated it would refine the system based on the pilot project and public feedback.
The ministry plans to conduct at least two additional pilot projects by the end of the year, testing different contract forms to analyze their applicability and effectiveness. According to the escrow system implementation plan established in September, the results of the pilot projects will be analyzed in December. Following this, the ministry will gather opinions from civic groups and industry stakeholders to push for amendments to the environmental impact assessment regulations starting in 2027.
Lee Chae-eun, Director of the Natural Conservation Bureau at the Climate Ministry, stated, "This pilot project is the first step in reviewing the procedures, effectiveness, and field applicability of the environmental impact assessment escrow system. We will do our utmost to successfully implement the escrow system to enhance the objectivity and reliability of environmental impact assessments."
* This article has been translated by AI.
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