Republic of Korea auctions 5.5 million allowances from market stability reserve.

On 1 June 2018 the Korean Government made available 5.5 million allowances from the Market Stability Reserve. According to the Korean Government announcement, the additional allowances are intended to stabilize the supply and demand balance in the national emissions trading scheme (KETS). This would facilitate compliance for regulated entities, which have until 30 June to surrender allowances for the 2017 calendar year.

Each regulated entity is limited to purchase allowances to cover up to 20% of their allowance shortage in order to prevent certain companies from monopolizing the auction volume. In addition, the auction floor price will be set based on the recent market price. This is calculated as follows: (the average price over the previous 3 months + the average price of last month+ the average price over the previous 3 days) / 3. The rational for the floor price is to prevent any unforeseen distortions from the auction and to ensure equity with companies that have already purchased allowances from the trading market.

The auction is in line with the Emissions Trading Scheme Act, which empowers the Ministry of Environment (through the approval of an allocation committee) to implement market stability measures under certain conditions.