This week South Korea became the latest country to announce a carbon emission trading system. The Korean ETS will start in 2015 and country is the first in Asia to announce such a scheme. As Australia’s fourth largest trading partner with a two-way trade of $31.9 billion in 2010-11, the move puts a further lie to the idea an Abbott Government will rollback the carbon tax if it wins office in the next 12 months. The Korean strategy plans for the republic to become one of the top seven ranked green economies by 2020 and one of the top five by 2050.
Not surprisingly the Korean decision has been welcomed by the Australian Government. Climate change minister Greg Combet was quick off the mark with amedia release on Thursday. Combet congratulated the South Korean Government for “taking this important step to drive sustainable growth and reduce greenhouse gas emissions”. Combet said Australia was now one of 34 countries around the world to use emissions trading as the primary vehicle to drive carbon pollution reduction. “We are far from leading the world, as some have claimed,” Combet said referring to Coalition carping that Australia was taking too much of a risk with its tax.
The South Korean cap and trade ETS will cover around 500 of the country’s largest emitters. The Government will set emissions caps and reduction targets for each trading period. South Korea’s carbon price is yet to be determined but the penalty for non-compliance will be capped at $83 a tonne. The environment ministry launched a voluntary “cap without trade” Target Management System this year. But from 2015, the ETS will be mandatory for installations emitting 25,000 tonnes of carbon dioxide equivalent and firms emitting 125,000 tonnes, with smaller entities continuing with the TMS. Three three-year phases are planned, with at least 95% of allowances given for free in the first two.
The bill that passed the national assembly this week was authored by the Green Growth Committee. The GCC was launched by Korean President Lee Myung-bak in 2009. A year earlier, on the 60th anniversary of the founding of Korea, President Lee explained why the ETS was needed. “Green growth is not a matter of choice, but a requirement that we must fulfil by all means for our future survival,” he said. “What matters is whether we can take the lead based on our own original technology, or whether we have to lag behind other countries.”
South Korea was the world's eighth largest emitter of carbon in 2010. In November 2009, the government adopted a medium-term emissions reduction target of 30%, relative to ‘business-as-usual’, by 2020. Just as they have done in Australia, the Korean business community strongly objected saying the plan was over ambitious and would make Korean industry uncompetitiveness. However, the Presidential Committee considered an ambitious target necessary in order to stimulate a broad range of clean technology innovation for greater energy efficiency across the economy, as well as for the deployment of renewable energies.
Korea enacted legislation in April 2010 to permit the government to intervene in the market “to address market failures in promoting green growth”. The law made provisions for the emissions rights trading system. Sustained industry opposition forced many revisions was followed by inter-party parliamentary squabbles that almost killed the bill. But on 2 May, the law passed during a surprise lame-duck session. The program was passed despite fears it would hurt the economy, because of the long-term benefits to the country’s huge conglomerates from being more energy-efficient and exporting greener goods.