Asia’s first national emissions trading scheme (ETS) officially entered into force on 1 January 2015. The Korean ETS covers 525 business entities from 23 sectors and now forms the second largest carbon market worldwide after the European ETS, with a three-year cap of 1.687 billion tCO2e (read more here on individual allocations to the liable entities). The Korean Exchange starts carbon trading (including derivative market operations) on 12 January. Participating entities are to submit their emissions reports by March 2016 and to surrender their allowances and offset credits by the end of June 2016.

The Korean ETS has faced intense opposition from industry and the government has taken measures to address their concerns. It has decided to waive the originally planned VAT on emissions allowances, with formal legislation expected to be passed in February (news article). Further, an emergency reserve of 14 MtCO2e may be made available at a later stage if there is a need for market stabilization. This is one of the various price management measures that may be implemented according to the ETS legislation, at the discretion of the Ministry of Environment and following specific criteria (see ETS Map).