Korea launched its carbon trading market this week, which government officials hope will help the nation meet its international commitments to reduce greenhouse gas emissions and foster green industries.
As expected, the market got off to a slow start, registering thin trading in terms of the volumes and values of the carbon emission allowances that changed hands. As officials say, it will take some time for the market to take root.
Korea opened the market under a law it enacted in 2009, which gives businesses carbon emission caps and those that exceed their quotas must buy allowances for more emissions, while those that have surplus amounts can sell their rights. The cap-and-trade system had been delayed for two years in the face of opposition from industries.
That the government launched the carbon trading market does not mean that industry has fully given in. Arguing that the 16 billion tons allocated to 525 major carbon-emitting firms is not sufficient, some petrochemical and steelmaking firms have taken administrative steps to appeal the emissions quota. The industry says the government should have raised the total quota of carbon emission allowances to at least 20 billion tons.
It is true that the allocation of emission caps will incur a considerable burden on the industry ― they will likely see their production costs rise and should brace for additional costs for buying allowances and in worst cases, pay penalties ― which would cost three times more than the emission rights.
In present times we can no longer demand sacrifice of the environment only to save business costs. Moreover, Korea is the world’s seventh-largest carbon emitter and we have already made international commitments to aggressively tackle greenhouse gas emissions.
The government pledged in 2009 to restrict greenhouse gas emissions to 30 percent below business-as-usual levels by 2020. Officials said operation of the carbon trading market will help the country to cut greenhouse gas emissions by 80 million tons by 2017.
Now both the government and industry need to work together to make sure the nascent market takes firm root. One of the most urgent jobs will be addressing the mismatch between supply and demand, for which the government may have to provide additional carbon credits.
Authorities will also need to diversify the carbon market ― including trading of derivatives ― and chart a mid- and long-term plan to develop the market as a regional hub of carbon trading.
The opening of the carbon trading market is also hoped to encourage the government and businesses to turn to the development of new eco-friendly industries such as renewable energy, energy storage and carbon capture and storage.