Korea will implement the greenhouse gas emissions trading scheme starting in 2015. The “Act on the Allocation and Trading of Greenhouse Gas Emission Permits” was enacted in 2012 and basic research necessary for formulating a national emission permit allocation plan and detailed guideline was carried out in 2013. In January 2014, the Korea Exchange was designated as an emission permits exchange, and an exchange system has since been in construction. A mock exchange will be held among target businesses in October. The “National Emission Permit Allocation Plan” will be formulated in 2014; it will include a comprehensive operation plan for the first phase (2015 to 2017), covering such aspects as allocations by sector and allocation standards for each business. The Ministry of Environment was designated as the single competent authority to ensure efficient and consistent scheme operation.
The emissions trading scheme is a system in which the government allocates emission permits to greenhouse gas-emitting businesses, requiring them to keep their emissions within the allocated emission limit and allowing them to trade any post-reduction surplus or shortage of emission permits with other businesses. Firms with a high reduction capacity (low marginal abatement costs) can achieve greater reductions and sell surplus emission permits on the emission permits market, and those with a low reduction capacity (high marginal abatement costs) can cut costs by purchasing emission permits to address shortages instead of directly reducing emissions.
Businesses subject to allocation of emission permits are those with total annual greenhouse gas emissions of 125,000 tons of CO2e or higher, and corresponding businesses of establishments of 25,000 tons of CO2e or higher.
The total emissions allowance set for each country is allocated to each sector and emission permits are then allocated to individual establishments. Emission permits are allocated for free or by auction. Allocation will be 100% free during the first phase of the plan from 2015 to 2017. The proportion of auctioned allocation will be gradually increased to 3% in 2018 and at least 10% in 2021 to reduce the industrial burden in the early stages of implementation and facilitate the soft landing of the scheme. To account for international industrial competitiveness, however, 100% free allocation will be available to industries with a high share of experts and energy-focused industries even after 2018.
An establishment that has been allocated with emission permits is required to carry out emission and reduction activities during the period concerned, measure its emissions, and report it to the government after verification by an external agency. The government evaluates the appropriateness and certifies the emission. Emission permits can be submitted as allocated or, in the event of a surplus or shortage, purchased from another establishment. They can also be borrowed from the following year. Offset emission permits (greenhouse gas reduction certified through an external project by a third party outside the establishment) can also be submitted. However, emission permits that are submitted in any way other than allocation are subject to size limits. Borrowing is restricted to 10% of the total emission permit, and offset emission permits are also limited to 10%. Overseas offsets are restricted to 50% of the submission of all offset emission permits. Surplus emission permits can be carried forward to and used in the following year.
A transaction account must be created in the registry in order to trade emission permits. They can be traded bilaterally, but the emission permits exchange provides a safe method. The government has prepared measures to stabilize the emission permits exchange market. It can supply the market with a reserve of emission permits in the event of a sudden price increase or other urgent circumstances and can also set minimum and maximum holding limits, borrowing limits, offset emission permit submission limits, and maximum and minimum prices for emission permits.
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Last modified : 2017-12-12 08:38
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