[Viewpoint] Bracing for carbon emission tradingWhen I visited KOEX recently, “The Seoul Money Show” was in progress. It was an event providing information on investment tactics and startup strategies in the uncertain economic environment of low interest rate, falling real estate price, rising price level and falling fund indices. A new item, the greenhouse gas emission right, is to be added to the Money Show.
The 18th National Assembly passed the act on allocation and trading of greenhouse gas emission rights at the last session. From January 1, 2015, the carbon emission trading system is to commence. The passing of the law put an end to the long contest between the government and industries.
The carbon emission trading system allows buying and selling the emission rights of greenhouse gas including carbon dioxide, the main cause of global warming, within the emission target. The company that makes reduction efforts and emits less than the allocated amount can sell the right through the emission trading exchanges, and the company that emits more than the allocated amount may buy additional right.
The emission trading system is in operation in many other countries. 31 countries in Europe have implemented the system, and mover than 12,000 companies are participating in the program since 2005. In the early phase, the program applied to only the industrial sectors, but it has been expanded to the aviation sector this year.
Ten states in the east coast of the United States enforce the system on power plants, and this year, California and other states in the west coast and Canada will follow the move. In 2011, Australian Senate passed the Clean Energy Legislation, which imposes 23 Australian dollars per 1 ton of carbon monoxide from July 1. From July, 2015, it will switch to the emission trading system.
China, the largest producer of greenhouse gas in the world, is no exception. Having been pressured by the developed countries, including the United States, China is to implement the system very soon. The pilot trading program is to be enforced in seven selected regions in 2013, and the system will be expanded nationwide in 2015.
In Korea, the greenhouse gas and energy target management program is enforced this year, and companies’ carbon emission is regulated. However, when a company fails to meet the reduction goal, it will be imposed a fine of 10 million won under the current system. The punishment is so light, and there is little motivation for additional reduction as companies cannot sell the left-over amount. The emission trading system will be able to supplement the current emission target management program as the garget can be met with low reduction cost and participating companies may be able to choose a reduction method that suits their needs.
However, we still have a long way to go, as many specific rules have not been clarified in the law. For example, the operation entity of the emission trading exchange and the allocation of the emission amount are yet to be determined. Also, the standards on accepting the early reduction before 2015 need to be decided, and the allocation adjustment on new businesses and expansions of the existing businesses should be clarified.
The most notable example is the Article 12, clause 4, which states that the businesses that incur more costs from greenhouse gas reduction than the standard will be provided with a free emission right, but the standard has not been clarified. Therefore, companies will make intense lobbying efforts to make sure the legal standards are set in favor of them.
The climate change is an increasingly serious global problem, and the trading system is only one of many means to resolve the global warming. The trading system is the first of its kind in Korea. Starting on a new venture always accompanies hesitation and fear. However, when we work together and share the burden, the sorrow will be halved, and the joy will double.
For the remaining time, we should remain open-minded and collaborate, and soon, the hesitation and fear will turn into courage and conviction. Only the people who had conviction and courage get the chance to enjoy the new, hopeful future. And Korea will be no exception.
Translation by the Korea JoongAng Daily staff.
*The author is the dean f the Graduate School of Industrial and Entrepreneurial Management at Chung-Ang University.
by Kim Jeong-in