South Korea should avoid giving away too many carbon permits as it starts a cap-and-trade system to cut greenhouse gases, a U.K. climate diplomat said.
A main lesson from the U.K. and Europe, which runs the world’s biggest emissions market, is “to prevent over- allocation,” said Michael Watters, head of the climate change section of the British Embassy in Seoul. The U.K. sent him to Seoul two years ago to share lessons learned while developing its climate policy and participating in the EU system.
“You need to fix the overall size of a cake before dividing it up, otherwise you can end up with the cake getting bigger and bigger,” Watters, 35, said in an interview “We had problems in the first stage of the EU trading scheme because of over-allocations.”
The cost of EU carbon allowances plunged to a record low of 7.87 euros ($9.80) this year after the bloc gave away too many permits, failing to foresee falling demand because of the recession and debt crisis. South Korea approved a cap-and-trade system in May despite opposition from the Federation of Korean Industries and the Korea Chamber of Commerce & Industry, the nation’s top two business lobbies.
The market-based program requires companies exceeding their emission quotas to buy permits from those that discharge less. South Korea would follow Australia, which started its carbon- pricing system this week, and China, which plans to begin regional pilot programs next year, in using cap-and-trade as tool for reducing emissions linked to greenhouse gases.
The U.K. Embassy helped arrange for members of South Korea’s National Assembly’s Special Committee on Climate Change and Green Growth to visit London and Brussels to learn more about cap and trade, a Korean government official said. They plan to bring in U.K. experts from government, industry and academia this year, Watters said.
The Korean government has yet to announce compliance rules for the bill, which calls for emissions trading to start in 2015. The government may give away 95 percent of the permits companies need for three to six years, according to the bill.
Watters forecast carbon markets in Korea, Australia and other countries may be linked with Europe’s emissions-trading system “in the not too distant future.”
“More linking makes emissions reductions cheaper,” he said. “Linking the EU scheme with the Korean scheme might be possible within the next 10 years or so.”
Watters called the climate talks in Durban, South Africa last year “a really important step forward” in the international negotiations. It clarified that all nations are working towards a new framework that applies to all countries, ending the current policy of imposing mandatory goals on developed nations and allowing voluntary targets for developing nations such as China and India.
The new framework “must contain legally binding mitigation obligations for all countries,” including developing countries, he said. But the levels of commitments “will vary depending on level of development and their capabilities.”
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