South Korea, Asia’s fourth-largest economy, says it will finalise plans in September for an emissions trading scheme covering the majority of the nation’s carbon pollution.
Trading is likely to start from 2012 and is part of a two-step plan by the government to mandate emissions cuts by big polluters. The trading scheme will allow firms to set a market price for carbon and other industrial emissions.
South Korea last year set a 2020 emissions reduction target, aiming to curb greenhouse gases by 30 percent from projected levels if no action were taken.
Although the target is voluntary, the government will impose regulations to force major emitters to comply as part of the nation’s efforts in the broader international fight against climate change.
Following are details of the scheme known to date and the emissions profile for the South Korean economy, which is heavily dependent on oil and gas imports.
PROPOSED EMISSION REDUCTION TARGETS
South Korea implemented a green growth law in April that set up the regulatory process to achieve the 30 percent reduction target.
While the environment ministry supervises the overall scheme, four ministries will set individual emission targets for 600 leading companies responsible for 70 percent of the country’s total emissions, or more than 90 percent of industrial emissions.
DATES FOR IMPLEMENTATION
The master plan will be set up by September. The biggest emitters, which produced more than 125,000 tonnes of CO2 in the past three years, will be given a grace period before they are
subject to mandatory cuts.
This extra time is designed to help them set up implementation plans, which are to be submitted by March 2011.
They must begin taking action by April 2011. No detailed incentives or penalties for the cuts have been decided.
Major emitters include the world’s biggest electronics firm by revenue Samsung Electronics and the world’s No.4 steelmaker POSCO. POSCO accounts for 10 percent of the country’s emissions at 60 million tonnes per year.
The nation’s emissions were just over 600 million tonnes in 2007, slightly larger than Australia’s, a large consumer and exporter of coal.
EMISSION TRADING PLANS
In addition to the cuts, the Presidential Green Growth Committee is separately drafting a bill for the trading of CO2 and other industrial gases to submit to parliament by September.
The bill will decide the ministry to run the plan from among Knowledge Economy, Environment or Strategy and Finance. The actual trading plan will be managed by either Korea Power Exchange, Korea Exchange or a new commodities exchange to trade emissions.
Korea Exchange has been promoting emissions trading and possible derivative products and is looking at cross-listing emissions products traded on other international exchanges.
With the bill, the presidential committee plans to adopt a ‘cap-and-trade’ plan, under which firms facing a greenhouse gas emission limit can buy allowances from other polluters to stay under their emissions cap.
The committee is also thinking of trading certified emission reductions (CERs). These are tradeable offsets or credits that are created under a domestic version of a U.N. scheme that promotes and rewards investors of clean-energy projects.
Linking the trading scheme with bigger markets such as China in future is also being considered.
