South Korea Plans Carbon Law as Companies Oppose $5 Billion Cost

South Korea aims to pass a law this year to help start carbon dioxide emissions trading by 2015, a plan opposed by manufacturers who say it will increase costs and make exports less competitive globally.

The National Assembly is expected to pass by December a bill for the proposed emission trading scheme, or ETS, Park Chun Kyoo, director general of the Presidential Committee on Green Growth overseeing climate change policy, said in an interview.

“Prospects for the bill appear quite healthy as it has backing from the ruling and opposition parties,” said Victoria Cuming, senior analyst at Bloomberg New Energy Finance in London.

The country will become the third in Asia Pacific to tax polluters after Australia and New Zealand. South Korea has pledged a 30 percent reduction in emissions from expected levels by 2020 and offered tax breaks to companies including Posco and Samsung Electronics Co. to pollute less and use renewable energy.

South Korea is taking a “step by step” approach to implement the ETS,’’ Park, 47, said Sept. 20 in his office in Seoul. “We hope to give a clear signal to companies that our binding commitments will continue.”

Australia plans to impose a price on emissions from next July before shifting to a cap-and-trade system three years later. New Zealand already has an emissions trading program in place.

The Korea Chamber of Commerce & Industry, which counts steelmaker Posco (005490) and Samsung Electronics among its 120,000 members, and Federation of Korean Industries have asked the government to delay implementing the plan on concern that higher costs will result in loss of market share to rivals from countries that don’t either tax or cap emissions.

$5 Billion Cost

Companies may face an additional 5.6 trillion won ($5 billion) of costs if ETS is implemented, according to data from state-owned Korea Energy Management Corp., which is tasked with emissions reduction and promoting renewable energy. Major industries including steel and petrochemicals stand to lose about 12 trillion won of sales, according to the Korea Economic Research Institute, a private research organization.

South Korea, the world’s ninth-largest greenhouse gas emitter, announced its voluntary goal to reduce green-house gas emissions blamed for global warming at Copenhagen in December 2009. The following year the government introduced a plan to set targets for the biggest polluters.

The government is in talks with 471 polluters ranging from factories, buildings and livestock farms that produce at least 25,000 metric tons of carbon dioxide a year to impose reduction targets by the end of September. These emitters generate about 60 percent of the country’s overall greenhouse gas emissions.

‘Binding Commitments’

“We will continue our binding commitments domestically to meet our pledges to the world,” Park said. South Korea’s emissions may fall after peaking in 2014 if the nation pursues its reduction target by 2020, he said.

The government has been providing tax and financial incentives to encourage companies to cut their emissions, including feed in tariff since 2002, he said. It is spending 1 trillion won this year on renewable energy, including the 395 billion won for feed in tariffs, or preferential payments, to solar, wind and other renewable energy projects.

The tariffs will be replaced with a 2 percent renewable portfolio standard, or RPS, starting 2012. The country’s 14 power generators and other energy producers would be required to derive a fixed quota of their energy output from renewable sources, including solar and wind.

Renewable Energy

The quota will be raised to 10 percent by 2020, which will help create demand for renewable-energy equal to 4.1 trillion won in 2012 and 54 trillion won by 2020, according to government estimates.

The feed in tariff program has prompted some polluters to buy technologies from advanced countries rather than developing their own, Park said.

South Korea, which imports 96 percent of its energy need, aims to raise its energy supply from solar, wind and other renewable sources to 11 percent of overall energy consumption by 2030 from an estimated 2.62 percent in 2011.

To contact the reporter on this story: Sangim Han in Seoul at sihan@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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