The South Korean government has announced plans to triple the carryover limit for greenhouse gas emission rights, an initiative aimed at boosting trading in the greenhouse gas emission rights market. (Image courtesy of Yonhap News)
SEOUL, Sept. 21 (Korea Bizwire) – The South Korean government has announced plans to triple the carryover limit for greenhouse gas emission rights, an initiative aimed at boosting trading in the greenhouse gas emission rights market.
Additionally, the government will extend the conversion period for carbon offsets, allowing greenhouse gas reduction achievements to be converted into emission rights. It will also enable financial institutions other than securities firms to participate in the emission rights trading market.
The Ministry of Economy and Finance disclosed that Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho hosted the 18th Emission Rights Allocation Committee on Wednesday afternoon at the Central Government Complex. During the meeting, the above-mentioned measures were confirmed to invigorate the emission rights trading market.
First, the carryover limit for emission rights, identified as a major contributor to increased emission rights price volatility, will be significantly increased from the current ‘one time’ to three times the net purchasing quantity.
If businesses purchase more than the amount they lack, they can carry over all of their purchases.
In 2019, the government introduced the carryover restriction system, considering that most businesses with surplus emission rights preferred to carry them over instead of selling them in the market. This system aimed to prevent companies with emission rights shortages from facing difficulties in obtaining them.
However, with the number of companies with surplus emission rights exceeding those with a deficit, restricting the carryover ceiling to ‘one time’ the net purchase compelled businesses to sell their surplus emission rights, resulting in a plunge in the price of emission rights.
The price of emission rights, accordingly, reached a record low, dropping to 7,020 won on July 24 from 40,950 won in 2019.
Against this backdrop, the government decided to invigorate emission rights trading by relaxing the restrictions on emission rights transactions and carryovers.
M. H. Lee (mhlee@koreabizwire.com)
