SEOUL: South Korea’s carbon emissions trading scheme, a key component of the government’s plan to cut greenhouse gas (GHG) emissions, became operational on January 12, 2015.
The ETS, which was intended to launch last year, plans to reduce GHG emissions to 30 percent below current levels by 2020.
The ETS will impose a cap on GHG emissions by 525 of South Korea’s largest companies, including airlines, and automobile, electronics, petrochemical, and steel producers, covering companies responsible for about 65 percent of the country’s carbon emissions.
However, during the first three years of the scheme’s operation, from 2015 to 2017, companies and energy producers will be allowed 100 percent of their benchmarked emissions limit without charge.
Companies will have to purchase credits if they wish to exceed their limits, and those that do not use their quota may sell their excess credits. The trading scheme has no links to the international carbon market, with participation being restricted to the 525 companies.
Business associations have warned that the ETS could put South Korean companies at a severe cost disadvantage internationally, despite the transitional arrangements, if countries in competition with South Korea have yet to introduce similar carbon tax schemes by the time the concessionary arrangements expire.