Aug 14 South Korea decided on Thursday that its carbon trading market will go ahead as planned on Jan. 1 of next year, despite the finance minister's calls last month for it to be delayed.
South Korea's scheme - the government's key policy to meet its targets of cutting greenhouse gas emissions in 2020 to 30 percent below business-as-usual levels - will be the world's second biggest carbon market when it launches.
As proposed, the scheme will cap greenhouse gas emissions from over 400 of the country's largest energy generators and manufacturers, and force companies to buy extra permits if they emit more than they have free allowances for.
The Ministry of Environment (MOE) will implement the scheme on Jan. 1, 2015, as previously planned, a spokeswoman with the ministry told Reuters. The decision came in a meeting on Thursday that included officials from the environment, finance and trade ministries, she said.
Industry groups say the emissions cap has been set too tight, and that the scheme would put a $29 billion burden on the South Korean economy, prompting Finance Minister Choi Kyung-hwan to suggest the scheme should be delayed.
"It is such a great burden as the government goes ahead with the scheme while the number of permits they offer is much smaller than those we require," said a senior official at the country's business lobby group Federation of Korean Industries (FKI).
The government has estimated that South Korea's carbon permits will trade at around $20 each, but some analysts say the price might be significantly higher because emissions are likely to exceed government predictions.
In order to ease the burden on emitters, the ministry had agreed to increase the number of permits handed out to industry, the MOE spokeswoman said.
Officials have yet to decide exactly how many extra permits will be handed out, but according to government sources it is likely to be around 10 million to 20 million extra over the three-year period to 2017, around 1 to 2 percent of the total.
The FKI official said an addition of that size would still not provide the number of permits needed by South Korean industries that fall under the scheme.
The European Union operates the world's biggest emissions market, while Kazakhstan and New Zealand also operate schemes.
Two regional schemes have been launched in the United States, the biggest one in California. China - the world's biggest-emitting nation - has launched seven pilot schemes ahead of a national market planned for later in the decade. (Additional reporting by Meeyoung Cho in SEOUL; Editing by Tom Hogue)
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