• Journal of Climate Change Research
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• v.6 no.1
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• pp.11-19
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• 2015

This study has aimed to compare an emission trading system (ETS) in the EU and Japan that introduced the scheme prior to Korea and provided the latter with a benchmarking model. Especially, the EU has a reputation for its well-organized and evolving system, and Japan has also successfully established the system despite its similar condition with Korea, such as an industrial structure and the degree of energy dependence. However, there are noticeable differences between the EU and Japan in their ETS. Whereas Japan has focused on securing certifications in CDM as the implementation of Kyoto protocol, EU has shown a tendency to transform the trading market from a parallel structure of EUA and CER transaction to only the EUA transaction after ending of 1st commitment period of the Kyoto Protocol. Since the differences were mainly caused by not only in a design of the system but also in internal governance and their national circumstance, it is meaningful to analyse the Korean case with a similar framework. This study may contribute to designing an appropriate system for emission trading in Korea through the comparison of the EU and Japanese case.

• The Journal of Industrial Distribution & Business
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• v.11 no.11
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• pp.7-18
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• 2020

Purpose: The Emission Trading Scheme (ETS), which enables structuring emission credits as a financial product, is taking a crucial position of global collaboration against climate change. Previous studies that have covered ETS subjects from the macro perspective contribute to facilitating legal enactment of this scheme. However, they have rarely addressed challenges aligned with issues arising from labor burdens for ETS works from the business perspective. Research Design, data and methodology: This study presents conceptual models that are expected to help design an electronic system. The study model contains four modules: emission allocation, data interface, reduction technology sharing, and emission trading. Two validation approaches, the Analytic Hierarchy Process (AHP) and regression analysis, are applied in confirming the feasibility of the proposed model. Results: This study suggests an IT system methodology to help improvement of the current K-ETS mechanism. In particular, this study addresses effectiveness for real businesses and the adaptability of this mechanism to other nations. Conclusions: The proposed IT platform diagram can contribute to successful operation of ETS by providing multiple benefits to participating companies through in-house allocation mechanisms, the soft-landing of ETS adoption to participating companies through reduction of technology-sharing, group purchases, and transaction costs through the trading system.

• Environmental and Resource Economics Review
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• v.30 no.1
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• pp.129-167
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• 2021

The emission trading system is an essential policy for reducing greenhouse gas emissions and converting low-carbon society. EU ETS is a good benchmark that is ahead of Korea's emission trading system in terms of operating period and design know-how. Therefore, this study focused on the key design elements of EU ETS phase 4 such as total emission allowances issued (Cap), free allocation method, carbon leakage list, market stability reserve, and innovation supporting system. In addition, we analyzed the impact of key design elements and their changes during EU ETS Phase 1 to 4 on the design and operation of Korea emission trading system in the future. First of all, the expected impact on the design of Korea emission trading system is to increase three demands: preparing benchmark renewal plans, establishing criteria for selecting free allocation industries that reflect domestic industrial structure and characteristics and introducing two-stage evaluations for free allocation industries, and preparing specific plan to support innovation and industries using allowance auction revenues. The next three impacts on the operation of Korea emission trading system are the increased needs for objective and in-depth impact assessment of plan and amendments, provision of system stability and response opportunities by quickly confirming plan and amendments prior to the implementation, and coordination of the emission trading system governance and stakeholder participation encouragement.

• Journal of Climate Change Research
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• v.7 no.1
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• pp.41-48
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• 2016

Korea has introduced Korea Emissions Trading Scheme (Korea ETS) since 2015. However, not many companies voluntarily participate in the emissions trading. The goal of this paper is to provide the way to improve the Korea ETS. This study compares the Korea ETS with EU Emissions Trading System, which has been practiced for a decade, and suggests three strategies to activate the Korea Emissions Trading Scheme. The first thing is to encourage more companies to participate in the emissions trading since the number of companies in the emissions trading in Korea is quite limited compared with that of EU. The second thing is to activate the trading of Korean Credit Unit in order to stimulate various emission reduction mechanisms. Currently, the most of the trading in the emissions market is through the Korean Allowance Unit. The third thing is to establish concrete measures to continuously improve the Korea ETS. A comprehensive evaluation of the Korea ETS is needed along with the ongoing convergence with the associated comments. The improvement of Korea ETS would be one of the most efficient ways to compete the climate change, and would also play a role to raise the status of Korea.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.40 no.3
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• pp.83-91
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• 2017

Climate change has been identified as one with the greatest challenges facing nations, government, business and over future decades. Activities to reduce greenhouse gas emissions by the Kyoto Protocol, the international community has been in progress. Korea also has introduced the Emission trading system to reduce greenhouse emission from the supervision of the government. Greenhouse gases emissions quantity should be internationally recognized. Mutual Recognition Arrangement should be recognized as the same greenhouse gas emission. International recognition of domestic verification body of international mutual recognition is required. Efforts are needed to secure the equivalence between the emission rights through direct cooperation with the relative nation accreditation body. Early entry into the IAF/PAC GHG MLA is essential for demonstrating equivalence between greenhouse gas emissions. Emissions trading will also require connection to the EU ETS, California, USA, and Tokyo, Japan to link Emissions trading. In the case of establishing accreditation standards and accreditation criteria, it will be necessary to distinguish between the domestic Energy Target Management System and the Emission Trading System. Independent greenhouse gases verification bodies should be established to meet the requirements of IAF and PAC. It is necessary to revise the qualification criteria for the verification of the greenhouse gas verification body according to international standards requirements. It is necessary to support the role of accreditation bodies of domestic greenhouse gas verification bodies. It is required to join international organizations of international mutual recognition of international trade and the need for pilot projects to link greenhouse gas emissions. The core link to our emission trading system is called EU-ETS, and we will need to join the IAF/PAC GHG MLA GHG. The International Mutual Recognition Agreement (IAF) is expected to allow international interoperability of GHG emissions verification between EA and the PAC. By signing a PAC GHG MLA, it will need to be prepared to prepare for the pilot project to link the emission trading system.

• Journal of Climate Change Research
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• v.7 no.2
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• pp.121-135
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• 2016

Korean Emission Trading Scheme entered into force on 1 January 2015. As other Emission Trading Systems, Korean Emission Trading System also have some deficiencies to be complemented and improved. Thus, the issues that are related to legal characteristics of emission allowance and its status as a financial instrument, terminology, requisites for the designation of the business entities eligible for allocation, banking and borrowing, and the non-permanence problems in the forestry offset mechanism are reviewed and the directions of the improvement are presented. The review of the Korean Emission Trading Scheme and its relevant act and the presidential decree at its early stage may be helpful for the Korean ETS to be firmly settled and to operate properly.

• Journal of Climate Change Research
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• v.8 no.3
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• pp.221-230
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• 2017

There are two main policies to meet the national goal of reducing Greenhouse Gases (GHGs) emissions in Korea towards Paris Agreement. From 2012 to 2014, Target Management System (TMS) was operated and the Emissions Trading Scheme (ETS) has been established since 2015. To compare the impact of TMS and ETS on reducing GHGs, we collected annual GHGs emission reports submitted by individual business entities, and normalized them using a z-variant normalized function. In order to evaluate the impact of those policies, we calculated the amount of GHGs emissions of 73 business entities from 15 business sectors. Those entities emitted $508million\;CO_2eq$, which is 74% of total national GHGs emissions in 2014. The main results of analysis indicate that accumulated GHGs emissions during the period 2012 to 2014 affected by TMS was higher than the national goal of GHGs emission reduction, and only the GHGs emissions in 2014 were in the range of allowed GHGs emissions, set by the Government. In 2015, when ETS initiated, total GHGs emission trading was $4.84million\;tCO_2eq$, which is only 0.9% of total allowance in 2015. However, more than 50% of business entities, who got the allowance of GHGs emission given by the Government, met the goal of GHGs emissions. Particularly, 27 of 73 business entities reduced GHGs more under the ETS rather than the TMS. Even though we analyzed only 4 years' data to demonstrate the impact of TMS and ETS, it is expected to commit the national goal of GHGs reduction target by TMS and ETS.

• Journal of Korean Institute of Industrial Engineers
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• v.43 no.3
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• pp.203-212
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• 2017

Emissions Trading System (ETS) is utilized in many countries, including South Korea, as an efficient policy to abate GHG (Greenhouse Gas) emissions. Grandfathering on the basis of historic emissions is used as the way to allocate permits in South Korea. It, however, has caused an increase in the emission permits and lack of equity. To overcome these drawbacks, we propose an alternative DEA model for centralized allocation of emission abatement to evaluate the amount of emissions abatement by company based on the energy efficiency. In addition, an empirical analysis of 36 assigned companies for ETS in Korean metal industry is conducted to validate the feasibility of the proposed model. The result of the analysis shows that energy-efficient companies achieve reduced target of the emissions abatement and companies with low energy efficiency score are turned out to have contrary outcome, against the result of applying Grandfathering.

• The Transactions of The Korean Institute of Electrical Engineers
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• v.64 no.5
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• pp.667-679
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• 2015

The bearer of the power sector's ETS compliance cost is power consumer for the following reasons. Firstly, power companies are constrained in establishing appropriate strategies to comply with ETS regulations due to the structural differences between the domestic power market and emission trading system. In other words, because power companies do not have a right to determine price and production of electricity, they have to compete with other companies under disadvantaged conditions in the emission trading market. Secondly, because ETS compliance cost is part of power production costs as it is also clearly written in the national greenhouse gas reduction road-map and the second energy supply plan, the cost should be included in power price following the power market operation rule. Thirdly, the most effective method to reduce carbon emissions in power sector is to reduce power demand, which is efficiently achieved through raising power price to a realistic level. Low power price in Korea is the major cause of rising power demand which is also the major cause of rising GHG emission. Therefore, power sector's ETS compliance cost should be included in power price to encourage power consumers' actions on reducing power consumption. Fourthly, when externality cost occurs in the process of delivering public services, usually beneficiary pay principle is applied to identify the cost bearer. Since electricity is one representative public good, the bearer of power sector's ETS compliance cost is power consumer.

• Journal of Climate Change Research
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• v.9 no.4
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• pp.471-485
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• 2018

The Republic of Korea (ROK) has made many efforts to reduce greenhouse gases through a legal framework, making obligations to reach domestic and overseas targets via the Paris Convention in 2015. China recently launched a nation-wide emission trading system (ETS) and has considered extending this ETS to include the ROK. This study examines the possibility of linking the ETS between ROK and China by considering the institutional design elements of the ETS. Additionally, this study provides policy implications to reach Korea's overseas reduction target. For the research methodology, the design elements of both the ROK and China policies were analyzed by categorizing their standard design elements based on the International Carbon Action Partnership. This paper focuses on four main barriers (cap type, borrowing, offset and price ceiling) based on their environmental benefits and analyzes the challenges to combining the design elements between the ROK and China systems. The two ETS commonly share the same cap types, and there is similar institutional progress regarding the offset and price ceiling. In addition to this, note that China has a borrowing system that is opposite to the borrowing system in ROK. According to these findings, there are major challenges to linking the ROK and China systems due to differences in the major design elements. Thus, it is necessary to modify the Korean domestic borrowing system and understand the Chinese institutional processes related to environmental negotiation to achieve further cooperation.