Feb 12 South Korea's refusal to revise estimates
of future greenhouse gas emissions could earn it the world's
highest carbon price, and have a potentially damaging impact on
its export-oriented industry, according to a report released by
Thomson Reuters Point Carbon.
The country's environment ministry last month decided to
stick to previous projections on how much carbon dioxide (CO2)
South Korea would emit in 2020 under a business-as-usual (BAU)
scenario, despite critics saying that the estimates were too
The BAU estimate will dictate the cap on carbon emissions
for around 400 of South Korea's biggest firms when the country
launches its emissions trading scheme on Jan. 1, 2015.
The scheme is to be the centrepiece of government efforts to
meet a national target of cutting emissions by 30 percent below
BAU levels by 2020.
The Point Carbon report said BAU emissions from sectors
covered by the scheme, for example power generation and
manufacturing, could be around a third higher than the
Point Carbon conducts analysis and price forecasting for the
carbon and power markets.
South Korea "risks imposing a very high carbon price on its
covered facilities if it maintains its current forecast", the
analysts said in a report published on Wednesday.
With limited emission reduction potential, South Korea's
carbon price is likely to rise to $93 per tonne of CO2, the
penalty for non-compliance under the scheme, the report said.
In comparison, carbon prices in Europe are around $9/tonne,
while emitters in California pay around $12.
"Such a high price could have a significant impact on
Korea's export-oriented industry," the report added.
South Korea is the world's sixth biggest exporter, selling
goods like semiconductors, cars, steel, ships and petrochemicals
for around $550 billion each year.
Industry lobby groups have argued the country's
competitiveness could suffer if the government imposes a much
higher carbon price than those faced by rival firms in Korea's
main export markets - China, the United States and Japan.
The Point Carbon analysts said the chances of high South
Korean prices were increased by the Ministry of Trade, Industry
and Energy's decision last month to lower the target for new
nuclear capacity, a move that could increase power sector CO2.
The analysts said that, as a result, the environment
ministry might be pushed to revise its projections.
According to the law underpinning the South Korean market, a
detailed plan outlining carbon caps for each participating plant
must be approved by the country's cabinet before the end of
June, leaving limited time to make major changes.
(Reporting by Stian Reklev; Editing by Michael Szabo and Simon