As Korea's prosperity has grown, so has its vehicle population. As of March, 2002, the Korea Automobile Manufacturers Association reported a population density of almost 270 vehicles for each 1000 South Koreans. That's quite a bit less less than the US rate of about 760 per thousand, but it still represents a 1,800% (!) increase since 1980. KAMA says that vehicle ownership in Korea should grow at 5.2% per year, reaching 670 per thousand by 2020. Where will they put them all?

To make things worse, Koreans (especially men) are following America's lead. They're buying big, fuel-guzzling SUVs, in spite of Korea's relatively high fuel prices (in 2000, over 1300 won per liter of gasoline, or just over US$4 per gallon). Why? The trend can be traced partly to a change in South Korea's tax structures.

Korea levies vehicle taxes and usage fees based on engine size. Until the last few years, the rates increased rapidly as engine size increased. The Korean government figured (reasonably, I think) that a Korean who could afford a large, powerful vehicle could also afford to pay more tax, and that he or she should pay some of the social costs of bigger vehicles (pollution, traffic congestion, more - yes, more - death and injury from accidents).

But in 1999, the tax rates were "flattened." In part this may have been a response to lobbying by the Korean auto industry, but as this document makes clear, we can at least partly blame a memorandum of understanding issued by the United States government.

The idea was to open Korea's markets to larger US-built vehicles, by making them large vehicles more affordable for Koreans. It was partly successful. Thanks to the lower taxes, cheaper fuel, Western influence, and Korea's fiscal recovery, the number of SUVs on Korea's roads jumped 80 percent from 1999 to 2000, to over 251,000.

Uh, one little problem, though. They're not Ford Explorers, Chevy Blazers, and Jeep Cherokees. Just about all of them have Korean names on them - Daewoo, Ssangyong, and Hyundai. At least so far, the US trade representative's memorandum of understanding hasn't resulted in any noticeable increase of US-made vehicles on Korean roads.

But it certainly has boosted fuel use. In the first two calendar quarters of 2000, Korea's gasoline use in vehicles actually declined more than 2 percent. But that's just gasoline. Korean SUVs usually burn LPG (liquefied petroleum gas), or Diesel fuel. These fuels are cheaper in Korea, because the taxes are lower. Increased vehicle use of LPG (up 36%) and Diesel (up 5%) more than made up for the drop in gasoline use. Overall, Korea's calendar year 2000 crude oil imports were up almost 37% over 1999 levels.

It's tough to see how a nation which imports virtually all of its petroleum, and which has the city (Seoul) with the world's dirtiest air, can keep on this way much longer.

The government has raised prices on LPG and Diesel fuel in an effort to rein in demand. Unfortunately, fuel price hikes affect everybody. The progressive taxes on large vehicles, repealed in 1999 at American behest, mostly hit the wealthy. So it goes, as Korea's air gets dirtier, roads get clogged, and the gap between rich and poor continues to widen.