Sejong, December 05 - During the 16th Emissions Allocation Committee meeting on November 24, the Ministry of Environment (Minister Han Wha-jin) announced the plan to improve the emission trading scheme, containing ways to encourage companies to reduce greenhouse gas emissions. The Ministry of Environment finalized the plan after intense discussion with the consultative body for ETS advancement during seven meetings over three months and after collecting suggestions from the field. The improvement plan consists of two stages: short-term tasks that can be immediately improved by revising existing guidelines and long-term tasks requiring fundamental reform to enhance the effectiveness of the Emission Trading Scheme.

In the short term, the Ministry of Environment will increase benefits for businesses from their efforts to reduce greenhouse gas by accepting 33 out of 40 short-term tasks proposed by companies participating in the ETS. The ministry will also ensure that the ETS works properly by streamlining complex administrative procedures.

First, the Ministry of Environment will improve the ETS to encourage businesses to make more effort to reduce greenhouse gas emissions. The Ministry of Environment will bolster green investing by allocating emission permits to companies that build facilities emitting less greenhouse gas or improve greenhouse gas emission efficiency by replacing old equipment. The ministry will recognize the cases of producing products with low-carbon raw materials like bio-naphtha or using renewables to achieve RE100 as outcomes of GHG reduction.  

Second, the Ministry of Environment will increase the trading of emission permits and reduce price volatility. Apart from companies participating in the emission trading scheme, the ministry will gradually increase the participation of financial institutions such as market makers. The ministry will invite local brokerage houses to participate in carbon emissions trading so that companies trade emission permits more conveniently. In addition, the Ministry of Environment will extend the deadline for the surrender of emission permits after determining the amount of emission in the previous year so that the participating companies can have sufficient trading periods. The ministry will support trading on emission permits to go on wheels by increasing market information disclosure to predict the price of emission permits more easily.  

Third, the Ministry of Environment will improve the criteria and procedures of certification for external projects. When a business entity holds greenhouse gas reduction certified by the United Nations and converts such reductions into domestic emission permits, the ministry will reduce the items for review and shorten the reviewing periods. If a participating company cannot prepare the necessary s for recognition of reduction due to COVID-19, the ministry will extend the deadline for application. The ministry will also enhance the consistency of the certification criteria to increase the predictability of external projects.  

Fourth, the Ministry of Environment will upgrade the emission measurement, reporting, and verification (MRV) more effectively and increase its accuracy. The ministry will upgrade the standards for measuring the volume of greenhouse gas emitted by electronic industries, including semiconductors, according to international standards. The ministry will also allow automatic stack emission monitoring for incineration facilities of those industries. The business entities will only need to submit the plan for monitoring greenhouse gas emissions if there is a change. 

Fifth, the Ministry of Environment will support new entrants in the emission trading scheme and SMEs so that the ETS will work more smoothly. For new facilities, the ministry will allocate additional emission permits if emissions increase by 1.5 times or more as the facilities go into normal operation, considering that emission permits were allocated based on the low level of emissions during the initial stage. The ministry will exempt annual fees of small businesses for emission trading schemes to ease the burden of those small businesses with low emissions trading volume. The ministry will support installing equipment to achieve carbon neutrality using revenue from the action of emissions permits. 

To more fundamentally improve the effectiveness of the ETS, the Ministry of Environment will enhance the method of emission permit allocation, including setting total emission allowances and increasing the proportion of emission allowances that the participating companies have to buy through auctions. The ministry will also select the project to improve the offset or carryover of emission permits as a priority. The consultative body for ETS advancement will continue to discuss with the concerned authorities and industries to develop measures to upgrade the emission trading scheme within the next year.

In addition, the Ministry of Environment made an administrative announcement for the following three revisions from November 24 for twenty days. 

1. Guidelines for the allocation and revocation of emission permits

2. Guidelines for reporting, verification, and certification of amounts of emissions

3. Guidelines for evaluating the propriety of external projects and certification of greenhouse gas reduction from external projects.  

Geum Han-seung, Deputy Minister for the Climate Change and Carbon Neutral Policy, said, "The measures to improve the emission trading scheme announced this time mainly focused on short-term tasks that can be improved immediately. The Ministry of Environment expects that the participating businesses will fulfill the duty to reduce greenhouse gases more easily." He added, "It is necessary to improve the existing emission trading scheme fundamentally to encourage companies to reduce more greenhouse gas. The Ministry of Environment will develop effective measures as soon as possible in consultation with concerned authorities and industries."

[Source: Press Release (me.go.kr)]