Insufficient Supply of Carbon Credits: Carbon Credit Trading Scheme is Malfunctioning in S. Korea | BusinessKorea

Monday, January 22, 2018

Insufficient Supply of Carbon Credits

Carbon Credit Trading Scheme is Malfunctioning in S. Korea

The carbon credit trading n South Korea is unlikely to be large in size.
The carbon credit trading n South Korea is unlikely to be large in size.
Seoul, Korea
20 December 2017 - 11:15am
Jung Suk-yee

The South Korean government held a cabinet meeting on December 19 and assigned a carbon emission of 538.46 million tons for next year to 591 companies.

Once the amount by company is determined, each company sets up a carbon emission plan for the period of 2018 to 2020. Each that exceeded its quota during 2015 to 2017 has to purchase carbon credits by June 2018 from those that did not.

The carbon credit trading is unlikely to be large in size. This is because companies can better handle uncertainties by carrying surplus credits forward than by selling the credits. In addition, they are thinking that the presence of surplus credits can negatively affect their next quotas.

The price of carbon credits is likely to rise due to an insufficient supply. In summer last year, when carbon credit trading began in earnest, the price had been around 10,700 won. However, it soared to 28,000 won in November last year.

With the situation as it is, the South Korean government is planning to supply a reserve of 14.3 million tons for market stabilization in 2018 to 2020. Still, local companies point out that it is just a plan adding to their uncertainties. The government has yet to come up with some details with regard to the carryover of a certain amount of carbon credits, too.

“The total quota of carbon credits is likely to decrease and the price is likely to increase with time, which means companies are not going to sell the credits,” said an industry insider, adding, “Then, companies exceeding their quotas will urge the government to supply more credits and conflict will not subside.”

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