Test - trading carbon

South Korea Passes Cap-and-Trade Legislation

South Korea has passed legislation that will see the introduction of a greenhouse gas emissions trading program in which companies will buy or sell rights to emit carbon dioxide. Although the legislation had bipartisan support working out the details may be difficult.

As reported in The Korea Herald, on May 2, the National Assembly passed the legislation on cap-and-trade with near unanimity. Of the 151 lawmakers who participated in the ballot, 148 voted for the bill. The legislation envisions a national carbon exchange to launch in January 2015.

It is projected to cover around 60 percent of the country’s carbon pollution by imposing limits on facilities that produce more than 25,000 tons of CO2 a year. About 450 facilities are likely to become subject to it. Penalties on non-compliers are set at three times the prevailing market price of carbon or a maximum of 100,000 won ($87) per ton.

Ninety-five percent of the permits will be given away for free in the first few years, with some export-oriented industries receiving a full 100 percent. Each permit represents a ton of carbon emissions.

“Korea has rolled out many projects on green growth so far, but the carbon emissions trading scheme is the most important of all and the one that will propel the ongoing efforts to a new level,” said Yang Soo-gil, chairman of the Presidential Committee on Green Growth.

South Korea, Asia's fourth largest economy, aims to reduce carbon emissions by 30 percent from projected levels by 2020. Korea is the world’s eighth-largest emitter of carbon pollution based on 2009 figures from the International Energy Agency. The country’s greenhouse-gas emissions jumped to about 640 million metric tons in 2011 from 350 million metric tons in 1990, making it the fastest-growing emissions source among 34 nations in the Organization for Economic Cooperation and Development.

“We anticipate a major shift in the country’s overall energy policies to follow in a near future to steer the domestic economy toward a low-carbon green economy,” Kim Sang-goo, an analyst at Kiwoom Securities, said.

Impacted industries are expected to resist the legislation once the details are ironed out.
The local business community had opposed the plan from its inception, saying that it would put Korean firms at a disadvantage in the global market because their competitors in bigger economies and bigger polluters ― namely the US, Japan and China ― are not subject to such a cap.

Although the law stipulates that 95 percent or more of the permits may be given for free, there will likely be resistance from industries that would like to see an even higher ratio.

Already there is disagreement within various branches of the government. The Ministry of Knowledge Economy (formerly the commerce ministry) is at odds with the Environmental Ministry. The Ministry of Knowledge plans to run a pilot carbon trading program in June, despite strong opposition from the Environmental Ministry, which has been running a similar program since 2010.

The Success of RGGI Carbon Trading Shows Cap-and-Trade Works

Despite opposition from Republicans, the Regional Greenhouse Gas Initiative (RGGI) has been shown to be very successful. A January 28th New York Times article reviewed RGGI a carbon trading initiative launched by ten northeastern states in January 2009. According to independent reports the emissions reductions have been greater and cheaper than expected, and have produced substantial fringe benefits in terms of lower overall electricity costs, more jobs, and greater regional independence of fossil fuel imports.

The RGGI cap-and-trade carbon trading scheme was based on the successful initiative to reduce emissions of acid rain precursor aerosols which in the 1980s and 1990s achieved significant reductions in SO2 and NOx emissions.

Republicans who once supported cap-and-trade decided to make the issue a political football and as part of their obstructionist approach they now rail against it. Although New Jersey Governor Chris Christie withdrew from RGGI, independent studies confirm it is clearly working well.

Since its inception in 2009, Northeastern greenhouse gas emissions have been reduced by 30 percent. This is largely due to switching from coal to natural gas reduced demand brought on by the recession. On its own the RGGI trading system accounts for 6 percent of these emissions reductions.

An independent assessment by the Analysis Group further indicated that RGGI has saved customers money and created jobs. Participating states have used proceeds from the auctions to promote energy efficiency and electricity generation from renewables. The study, commissioned by four nonprofit foundations and conducted by the Boston consulting firm Analysis Group.

These findings demonstrate that carbon trading under a cap-and-trade system is the best way to use the free market to reduce emissions in a way that minimizes harm to the economy. When the review period comes to an end in the summer 2012 it will likely be declared a success and be subject to more stringent cuts and more widespread adoption. This is great news for the environment and the economy.

Research shows that Republicans are on the wrong side of this issue as the RGGI program illustrates that the benefits of carbon trading far outweigh the costs.

© 2012, Richard Matthews. All rights reserved.

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