Isra-Mart srl:South Korea moves to join carbon trading club

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The global carbon market may have received a major body-blow with the US failure to pass emissions cap-and-trade legislation this year, but it looks like the sector could still receive a timely boost from the other side of the Pacific.

South Korea this week became the latest country to unveil legislation that would enable a national emissions trading scheme, joining Japan, Australia and China in working on various carbon trading mechanisms.

Under the proposed legislation, the country would introduce a cap-and-trade scheme loosely modeled on the EU's emissions trading scheme (ETS) from 2013. During the first phase of the scheme, which would run from 2013 to 2015, the government would distribute 90 per cent of the carbon allowances free of charge, while auctioning the remainder.

As with the EU's ETS, the government would then aim to increase the proportion of auctioned carbon credits over time, while simultaneously reducing the emissions cap governing the scheme.

The legislation, which still requires approval from the government, will also include measures designed to ensure that the price of carbon delivered through the scheme does not prove too volatile. In particular, the government would reserve the right to stabilize the price by staging early auctions of allowances to increase the supply of credits when the price rises too high.

The scheme will complement a separate initiative that requires over 370 of South Korea's largest firms to set greenhouse gas emission targets by September 2011.

Jung Do-hyun, an official at the Presidential Committee on Green Growth, told Reuters that the government was keen to move swiftly with the new legislation. "We are hoping to propose this bill to the National Assembly later this year after hearing public opinions," he said.

The move will further bolster South Korea's reputation as one of the world's premier clean tech hubs after the government last month announced a second green stimulus package that will see $36bn (£22.6m) invested over the next five years in the development of renewable energy and low-carbon projects.

The legislation will also underline the Asia-Pacific region's leading role in the development of a new carbon trading mechanism.

Despite numerous setbacks, Japan and Australia are both still working on legislation that could result in emissions trading schemes being introduced, while the New Zealand government this summer faced down opposition from some business groups to launch its own national cap-and-trade scheme.

Most significantly, the Chinese government is continuing to explore the prospect of some form of carbon pricing mechanism and is reportedly working on a number of regional trials that could ultimately form the basis for a national scheme.