On Monday (January 12, 2015), a new South Korea cap-and-trade market opened on the Korea Exchange. This carbon trading scheme is now the second biggest in the world, behind only the European Union’s, until China’s national market revs up in 2020.
Its large size shouldn’t come as too much of a surprise, because South Korea is the world’s seventh largest annual emitter of greenhouse gases, after China, the U.S., India, Russia, Japan, and Germany. The new market is the first national trading scheme in Asia. With the South Korea cap-and-trade market in place, the Asian nation will gain greater control over its fossil-dependent industries and be able to invest more in cleaner technologies.
South Korea aims to cut greenhouse gas pollution 30% by 2020, and the new market puts that amount within reach. The South Korea cap-and-trade market includes 525 of the country’s largest polluters, which make up two-thirds of the nation’s nonvehicular emissions. They include power generators, petrochemical firms, airlines, steel producers, car makers, and electromechanical firms.
Each entity has a fixed number of permits to cover its own emissions for the next three years. The total emissions the government will allow for 2015-2017 is 1.687 million tons CO2eq. To emit more than allotted permits will cover, a polluter must purchase allotments from another market member that has reduced emissions below its own benchmark cap.
Monday’s trading ended up with figures comparable to those at the EU. Anders Nordeng, a senior analyst with Thomson Reuters Point Carbon, told the India Economic Times, “We expect modest volumes initially, probably for the first six months, partly because the mechanism is new and relatively unfamiliar for the participants, partly because we think many Korean industrials will avoid acting in a manner that would give their competitors any indications on their growth rate.”