Korean Emission Trading Scheme Scheme design and the road ahead - - PowerPoint PPT Presentation

Korean Emission Trading Scheme

Scheme design and the road ahead

Table of Content

I. Overview II. Recent landmark on GHG mitigation III. Target Management Scheme IV. Emission Trading Scheme Design V. Road Ahead and Challenges

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4-STEP

• 2020 National

Reduction Target set (30% from BAU)

• Enacted the ‘Low

Carbon Green Growth Act’ provisions for ETS

• Designed the Target

management scheme (TMS) Implementation in 2012

• Sectoral Targets

set for 2020

• Emission Trading

Legislation (May) & the Presidential Decree (Nov) passed

2009 2010 2011 2012

Recent landmarks on GHG mitigation 서

Substantial progress in mitigation policy in the last few years

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298 594 776 543

1990 2005 2020 Target

30% reduction (233 MT CO2e)

unit: Mt CO2e

The national target (2009) 서

Estimated that such ambition could imply some 233MT CO2e reduction in 2020 from the business-as-usual scenario

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As a follow-up to the national target, emission pathway and sectoral reduction targets were set in July 2011

Sectoral targets (2011) 서cc

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Industry 18.2% Transport 34.3% Buildings 26.9% Agriculture & Fisheries 5.2% Waste 12.3% Public 25.0% Total 30.0% Sectoral targets (reduction from BAU)

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Target Management Scheme (TMS) 서cc

• Designation criteria

TMS coverage

67%

• f total GHG emissions
• Launched in 2012
• TMS covers 66% of total GHG emissions
• Some 530 entities designated at the end
• f 2013

125000 87500 50000 25000 20000 15000

before Dec. '11 after Jan '12 after Jan '14

500 350 50000

25000 20000 15000

before Dec. '11 after Jan '12 after Jan '14

entity facility

GHG emission criteria (CO2e T) Energy consumption criteria (terajoules)

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Target Management Scheme (TMS) 서cc

Similarities to ETS

• Measurement, Reporting

and Verification (MRV) Process

• Cap Setting Process

Limitations

• NO tradable emission permits
• NO flexibility

(Banking/Borrowing)

• NO proportional penalty

(only fixed penalty)

• Led to the legislation of the “Greenhouse Gas Emission Permit Allocation

and Trade Act ” (Bipartisan support in the National Assembly)

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Emission Trading Scheme (Key Objective)서cc

Reduce GHG in a cost- effective manner Promote low-carbon technology development & deployment

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ETS (Key processes and legal plans)서cc

Basic Plan

Allocation Plan Designa- tion of Entities Allocation

• f Permits

Reporting & Verification Submiss- ion of Permits Basic Plan

• 10 year plan
• Every 5 years
• Ministry of Strategy and

Finance

• Policy direction for ETS,

BAU forecast, economic impact assessment, etc. Allocation Plan

• Every phase (3~5 yrs)
• Ministry of Environment
• ETS cap, Cap for each

sector, Allocation methodology,

• Reviewed by the Allocation

Committee

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ETS (Scheme design)서cc

• Average emission of 3 years* prior to the

implementation phase

Entity criteria 125,000t CO2e, Installation criteria 25,000t CO2e

• 2015~2017
• 100% free

allocation

• 2018~2020
• 97% free

allocation

• 2021~2025
• Less than 90%

free allocation Phase I Phase II Phase III

• > 5% of production cost intensity + > 10% of trade-

exposed intensity

• > 30% of production cost intensity
• > 30% of trade-exposed intensity
• Voluntary participating entities

An Implementation phase 5 years from Phase III

Coverage Implementation phases & free allocation 100% free allocation for EITE entities

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ETS (Flexibility)서cc

• Banking allowed to the next implementation year within

the same phase or the 1st year of the next phase

• Borrowing allowed from the next implementation year

(max of 10% of total necessary permits for submission) Banking & Borrowing

• Max of 10% of total necessary permits for submission
• International offsets are allowed starting in Phase III

(50% of total offset permits) Offsets

• Max of 3% of total necessary permits for submission

(only for Phase I) Early Action

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ETS (Adjustment, cancelation & fine)서cc

• Adjustments in allocation of permits is possible when:
• there is a change in the Allocation Plan;
• - there is request from entities for additional permit

allocation due to unexpected expansion or merge acquisition and change in operation Adjustments

• Cancelation of permits is possible when:
• there is a closure;
• delay in operation of over 3 month; or
• suspension of operation of 1 year

Cancelation

• Up to 3 times the average market price
• Max of 100thousand KRW (US$ 91)/tCO2e

Fine for non- compliance

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NAP (National Allocation Plan), Sep 2014

• 1,686 million KAUs(Korean Allowance Unit) from 2015 to

2017

• some 1,597 million KAUs to be allocated to entities before

starting

• 89 million KAUs reserved in National Reserve for market

stabilisation and additional allocation for expansion Cap

• 100% free allocation
• Grandfathering based on historic emissions for

electricity, steel, chemical and others(total 20 sub- sectors)

• Benchmarking based on productivity for refinery,

cement and domestic flight Allocation

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Hurdles until legislation and NAP 서cc

Experts and NGOs

• Until legislation
• Act now
• momentum for green growth
• Until NAP
• Act now
• momentum for low-carbon &

creative economy

• cap too high to boost

technology investment Industry

• Tens of public hearings, dozens of stakeholder meetings….
• Until legislation
• Wait for international

agreement and Act later

• negative effects on national

economy

• Until NAP
• Wait for international

agreement and Act later

• negative effects on national

economy

• cap too low

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ETS (Timetable for Phase I)서cc

Nov 2014 Jan 2015 Mar 2016 Jun 2016

• Allocation finalized in the Allocation Approval Committee
• Permit Exchange Opens
• Submission of emissions report
• Submission of emissions report

Jun 2017 Dec 2017

• Submission of permits

Mar 2017

• ETS phase I official launches
• Submission of permits
• Phase 1 ends

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Thank You

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