This report discusses issues, policies and mechanisms in the Republic of Korea's energy sector in light of increasing energy import dependence and the need for greater energy efficiency. The government's development strategy is discussed with respect to its emphasis on price stability, efficiency in resource allocation and flexibility in responding to an uncertain external environment, and increased reliance on market forces and private initiative. Policy recommendations are made relevant to oil and gas supply security, petroleum product pricing, taxation and fiscal levies, the refining industry, liquefied petroleum gas and natural gas imports. Supply and demand issues are examined in the domestic coal and electric power subsectors. The potential of district heating from combined heat and power plants to improve efficiency of energy use, to diversify to cheaper low-quality fuels, to reduce space heating costs, and to reduce urban air pollution is explored. The government's energy conservation policies in industry, residential/commercial, and transport areas are examined as are environmental aspects of energy use.