Trading dries up in South Korea's new carbon market

[SEOUL] Trading in South Korea's carbon market, touted as the world's second-biggest, has got off to a slow start, with volumes drying up soon after its launch in mid-January.

The market is a key component in the South Korean government's plan to meet a target of limiting climate-changing greenhouse gas emissions in 2020 to 30 per cent below current levels.

But officials said trade was likely to gradually pick up as participants got used to the market, with analysts previously saying that volume would be modest for at least the first six months of operations. "It is hard for participants to predict how much they will emit at this early stage ... the market seems inactive due to concerns that they may face permit shortages later after selling permits in advance and emitting a lot," said an official at the environment ministry, which oversees the scheme. He declined to be identified as he was not authorised to speak with media.

Under the scheme, power generators, petrochemical firms, steel producers, car makers, electro-mechanical firms and airlines have been given a fixed amount of permits to cover their emissions for the next three years. Any company emitting more than they have permits to cover must buy allowances from others in the market.

An official at the Korea Exchange (KRX), which runs the market, noted that there had been bids to buy permits but no offers to sell since the last trade was recorded on Jan 16. He said that had pushed up prices to 9,960 Korean won (S$12) on Thursday from 9,610 won in the middle of last month.

South Korea is the second country in Asia after Kazakhstan to launch a nationwide emissions market. It has no links to the international carbon market Regional schemes are in operation in China and Japan.

REUTERS