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South Korea to impose stricter emissions trading rules to boost prices

Bloomberg
Bloomberg • 2 min read
South Korea to impose stricter emissions trading rules to boost prices
Water vapour and smoke rise from an industrial complex in Ulsan, South Korea. The nation will open up its carbon market to a wider group of participants, including asset managers, banks and insurers. Photo: Bloomberg
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South Korea will expand participation in its emissions trading system as part of a set of reforms aimed at improving its stability and impact, according to the Ministry of Environment. 

The Asian nation will open up its carbon market to a wider group of participants, including asset managers, banks and insurers, the ministry said in a statement. It will also tighten regulations on scrapping excess carbon credits, according to the statement.

The revisions, which will enter into force on Feb 7 next year, comes after South Korea pledged last year to overhaul its carbon market. The system has been struggling with sluggish prices spurred by persistent oversupply of permits, 90% of which are allocated for free until next year.

Currently, the government can scrap permits when companies significantly reduced emissions through plant shutdowns or suspension of operations that were not part of their mitigation efforts.

The reform will allow cancellation of allowances even when the emissions reduction is smaller, accounting for less than 15% of a firm’s allocated cap. It was devised after some businesses made millions of dollars by selling leftover allowances. 

South Korea’s cap-and-trade system covers more than 70% of the nation’s emissions from almost 700 companies across sectors such as utilities, construction and transport, that release an annual average of over 125,000 tonnes of CO2 equivalent.

See also: ISCA, SGX RegCo launch mock sustainability report as guide for companies

Next year, the government will allow voluntary participation of firms with annual average emissions above 3,000 tonnes, according to the statement.  

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