Second-biggest carbon market launched by South Korea

The world’s second-largest emission trading scheme began trading on Monday in South Korea. The scheme imposes emission caps on the country’s largest 525 companies.

The cap-and-trade system was approved in 2012 and caps the country’s emissions at 1.687 million metric tons of carbon dioxide, it covers the period from 2015 through to 2017. The move aims to cut greenhouse gas emissions by 30% by the end of the decade when compared to a business as usual mode.

The system operates by giving the companies involved emission allowances, which they are then able to trade if they require less. This means that the price of carbon is set in the market and can be highly variable, the cap-and-trade system does however ensure that emission reduction targets are met.

Speaking to Reuters, Anders Nordeng, a senior analyst with Thomson Reuters Point Carbon, said, “We expect modest [trading] volumes initially, probably for the first six months.

“Partly because the mechanism is new and relatively unfamiliar for the participants, partly because we think any Korean industrials will avoid acting in a manner that would give their competitors any indications on their growth rate.”

Some carbon permits have already been traded for similar prices seen within the European emission trading market, which is currently the largest. However, according to Thomson Reuters Point Carbon, prices could rise as power generators are estimated to be around 75-90 million permits short, potentially leading to increasing demand in the coming years.

Photo: Pedro Pimentel via Flickr 

Further reading:

Investors call for Emissions Trading Scheme fix

UK calls for changes to EU emissions system to boost low carbon investment

Business lobby urges European leaders to set ambitious climate change targets

Industry mulls over future of carbon price floor