August 22, 2007 (The Korea Times) – Seoul air might freshen up a bit, as the government said Wednesday that a local market that buys and sells carbon dioxide emission rights will open by the end of this year, a move seen as a state effort to prevent global warming and power new growth.President Roh Moo-hyun met with policymakers during a national energy commission meeting to discuss needs to cut back on carbon dioxide emissions and ways to work around the global issue.
The carbon credit exchange is a pollution-cutting strategy that uses the market mechanism – the global Clean Development Mechanism (CDM), in which companies can basically choose between reducing their CO2 emissions or paying to continue to pollute.Backed by the United Nations, the CDM process aims to have companies contribute to the reduction of global greenhouse gas emissions and “sell” the results at international carbon exchange markets, including the Chicago Climate Exchange and those run by the European Union.
As one ton of carbon is traded at $10, the current size of the local CDM market is estimated at about 119.8 billion won, but the figure is expected to jump to 448.8 billion won by 2012.
“If the South Korean carbon exchange becomes a viable market, 434.3 billion won worth of the total market will be capable of being traded on foreign climate exchanges,” Vice Energy Minister Lee Jae-hoon said.
He said this could account for 11.8 percent of the global CO2 exchange volume that is expected to reach 3.68 trillion won in 2012.
Lee also added that Seoul plans to allocate 68.5 billion won from 2007-2011 to buy CO2 saved by local companies to hike trading and provide incentives.
“Five billion won will be spent this year once the market opens, with the government paying 5,000 won per ton of CO2 saved,” said the vice minister.
Nine state-run energy companies, including Korea Electric Power Corp., Korea Hydro & Nuclear Power Co. and Korea District Heating Corp. are to sign a renewable portfolio agreement designed to fuel greenhouse gas trading, he said.
These companies must meet set targets to expand the use of clean, reusable energy, and if they fail to do so they must buy CO2 rights from the local carbon exchange market.
Although not a member of Annex I of the Kyoto Protocol that went into effect in early 2002, South Korea _ ranked 10th in the world in terms of C02 emitted as of last year _ has been pressured by the international community to join the reduction move.
The Kyoto Protocol calls for countries to reduce their aggregate emissions of greenhouse gases by at least 5 percent from 1990 levels during the 2008-2012 period.
Seoul has maintained that it cannot participate in mandatory reductions unless China and India take similar actions.