South Korea’s Carbon Trading Scheme is Creating Profits for Polluters

In an eye-opening revelation, South Korea’s carbon trading program, initially hailed as a step forward in the fight against Climate change, appears to have taken a detour. According to a report by Seoul-based climate advocacy group Plan 1.5, the country’s biggest polluters have unexpectedly profited, raking in a staggering 475 billion won ($357 million) by selling off unused carbon emissions permits over the first eight years of the program.

Source: CNBC International/YouTube

This carbon cap-and-trade system, which involves nearly 700 companies, was designed to encourage a reduction in Pollution by making it costly for companies to exceed emission limits. However, the outcome has been quite the opposite. The 10 largest emitters alone sold almost 22 million tons of surplus credits from 2015 to 2022. This surplus, especially pronounced in the last two years, equates to about 6% of Korea’s total emissions in 2022, indicating a significant flaw in the system’s design.

South Korea’s pioneering efforts in Asia to launch such a trading system were aimed at achieving a substantial cut in greenhouse gas emissions, targeting a 40% reduction by 2030 from 2018 levels. However, Plan 1.5 points out that the scheme’s overly generous allocations, most of which were distributed for free, have inadvertently turned it into a profitable venture for the very companies it was meant to regulate.

The criticism centers around the program’s failure to push for genuine reductions in carbon emissions, with advocates calling for a drastic reduction in allocations to prevent it from becoming a mere financial game for big emitters. Posco, the nation’s leading emitter, found itself with excess permits after a typhoon disrupted its operations, showcasing how unforeseen circumstances can further skew the system’s effectiveness.

With carbon permit prices in South Korea plummeting by 43% over the past year, the stark contrast with the European Union’s more robust system highlights the challenges and complexities of making cap-and-trade work. As South Korea plans to consult stakeholders and revise its approach, the world watches, hoping for a turnaround that aligns the nation’s economic activities with its environmental commitments.

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