On 5 April 2017, the Ministry for Strategy and Finance announced changes to the banking and borrowing provisions within the Korean Emissions Trading System (ETS). Previously, banking allowances between phases had been allowed without any restrictions. However, given concerns that entities have been hording their freely allocated allowances, the Ministry for Strategy and Finance announced that allowances would be deducted from an entity’s future free allowance allocation if they were deemed to have ‘excessive carryover’. Entities can now bank 10% of their average annual phase one allowances plus an additional 20,000 allowances. Emitters with inventories greater than that will have their allocation reduced in the next phase (phase two: 2018-2020). The change in banking restrictions was coupled with an increase in borrowing provisions. Previously, an entity could borrow up to 10% of next year’s allocation. A one-off increase to 20% was allowed in 2016. However, from 2017 onwards, the Ministry for Strategy and Finance announced that entities will be allowed to borrow 15% of their next year’s allocation. The Ministry hopes that these changes will increase entities’ willingness to sell allowances; thereby increasing the allowances available for trade in phase one.
