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A solar panel installed at a private residence. (Hankyoreh file photo)

The South Korean government decided to increase the total amount of carbon credits that are allocated to corporations during the first phase of the greenhouse gas emissions trading scheme, which is ending this year, by 17.01 million tons, from the initial amount of 1,597,730,000 tons to 1,614,740,000 tons. Increasing the total amount of carbon credits enables corporations to lessen the burden of reducing greenhouse gases. At the same time, the corresponding increase in greenhouse gases released into the atmosphere represents a step backward in dealing with climate change.

During a cabinet meeting on Jan. 24, the government adopted the carbon credits allocation plan for the third implementation year of the first phase of the emissions trading scheme (2015-2017) and the basic plan for the second phase of the emissions trading scheme, which will run from 2018 to 2020. The first of these plans adds 17.01 million tons to the total amount of carbon credits and recognizes more than 51.39 million tons of reduction achieved prior to the implementation of the trading scheme, allocating more than 68 million tons of additional greenhouse gas emissions credits altogether.

According to the greenhouse gas emissions trading scheme, the government provides carbon credits to companies that release more than a set amount of greenhouse gases and requires their greenhouse gas emissions to stay within the scope of their allocated carbon credits, while allowing them to buy or sell credits on the market if they have too many or too few. The scheme is designed to bring about an overall reduction in greenhouse gases in the country as a whole in the most cost-effective manner.

The scheme is also called “cap and trade,” and as this implies its success depends upon strictly maintaining the “cap,” which is to say the upper limit on the total number of carbon credits, experts say. The reason is that it is only when companies are allotted fewer carbon credits than they actually need that they will take actions to reduce emissions or to purchase carbon credits.

More than 51.39 million tons of the more than 68 million tons of additional carbon credits that the government has decided to allocate this year will not affect the total number of carbon credits. These are included in the total as part of the more than 88.82 million-ton reserve that was already set aside to be used for measures to stabilize the market, for recognition of early reduction results and for companies and facilities that become newly eligible for the emissions trading scheme. But the 17.01 million tons of new allocations are a pure addition that was not included in the previous total, which means that the total amount of credits for greenhouse gas emissions will increase accordingly. That is how much additional greenhouse gases that companies will be allowed to emit.

South Korean greenhouse gas emissions (Unit: ton) and 2017 emissions allotment (Trade unit of emission allotment: CO2 1 ton)

The government explains that it has taken the step of increasing the total amount of carbon credits to reflect the national goal of reducing greenhouse gases. When the government submitted to the UN in June 2015 its new greenhouse gas reduction goal (replacing a reduction of 30% of business-as-usual (BAU) emissions estimates by 2020 with a reduction of 37% of BAU estimates by 2030), it described the plan as “an advancement over the previous plan.” But the government’s new emissions reduction goals allowed companies to emit more greenhouse gases. In effect, this basically shows that the revised greenhouse gas reduction goals give up ground from the previous reduction goals, in contrast with what the government has claimed to date.

The grounds the government has given for allocating additional carbon credits is an imbalance between supply and demand in the domestic carbon credit trading market. But this imbalance is caused not by a shortage of the absolute number of carbon credits but rather by companies with extra carbon credits hoarding them instead of putting them on the market. In 2015, the government announced that there were 6 million extra carbon credits on the emissions trading market, since there were 549 million tons of total carbon credits on the market, while companies‘ actual emissions amounted to 543 million tons.

“Even as the government watches the EU sow confusion by allocating excessive carbon credits, it’s going down the exact same path. Allocating additional carbon credits will not only create unfair profits for certain companies but will also increase the number of carbon credits that are carried over after the first phase of the trading scheme, making it even harder to reduce greenhouse gases through the carbon credit trading scheme,” said Ahn Byeong-ok, director of the Institute for Climate Change Action.

While the government has been allocating the entire amount of carbon credits to companies for free, in 2018 it is planning to auction off as much as 3% of the credits and to use the proceeds to fund investments into eco-friendly solutions. It also agreed to change the allocation method, which has been based on companies‘ past emissions performance, to favor companies that have already reduced their greenhouse gas emissions through eco-friendly investment. The government decided to accelerate the schedule for allowing companies to exchange carbon credits acquired through overseas reduction efforts from 2021 to next year and to also recognize as carbon credits the amount of reductions at companies or facilities that are not eligible for the carbon credit trading system.

By Kim Jung-su and Cho Kye-wan, staff reporters

Please direct questions or comments to [english@hani.co.kr]

South Korean greenhouse gas emissions 　(Unit: ton)

　2017 emissions allotment (Trade unit of emission allotment: CO2 1 ton)