In the beginning of January 2015, South Korean government passed legislation proposing the world’s 2nd largest carbon trading scheme that would cut emissions by 30% by the year 2020.
Currently, the largest scheme occurs in the European Union. The country’s cap-and-trade program plans to cap the emissions of carbon dioxide (CO2) of 525 of the country’s largest companies – including Samsung – at around 1.68 billion metric tons of CO2 over a three year span. This averages out to 560 million metric tons of carbon emissions annually compared to the projected 618 million metric tons of carbon which seems too drastic of a reduction for some economist. The Reuters news agency is currently one of the prominent sources addressing this story and Reuters predicts that carbon in the South Korean market will start at around $10USD this year and rise to approximately $30USD by the end of 2017, noting that higher estimates have been made.
Countries that have cap-and-trade programs implemented have much lower carbon cost at around $3-12USD making it difficult for these countries to participate with South Korea’s projected high prices. Furthermore, there will surely be resistance from these companies because they will lose a competitive advantage in their respective markets with similar companies not forced to participate in the new carbon trading market.
What is carbon trading?
To understand the significance of the initiative from South Korea, the nature of carbon trading needs to be discussed, briefly. The principle behind a carbon trading system is that a government, business, or individual can buy, sell, or trade carbon credits and offsets in a market. The carbon credits and offsets determine how much carbon or production a company can proceed with (e.g. one carbon credit may be worth 100 metric tons of carbon). Therefore, the more credits you have, the more you can produce as an industry. For a more extensive look at what carbon trading is check out Carbon Trading 101. It should be noted that a common opposing view to carbon trading is that it still does not promote extensive carbon reductions but rather allows larger, more powerful companies to simply pay to pollute more.
Downtown Seoul. Image Source: http://bit.ly/1C4ZGSV
Permits are a specific policy instrument that are based on regulation and compulsory in nature. Popular in the United States, permits are issued by governments across the world requiring businesses to comply with regulations that specify the amount of emissions allowed. Though this is argued as a positive or at the very least, a neutral approach to carbon emissions, it often does not promote fewer emissions which is what is needed at this time in order to soften the blow of climate change.
What makes South Korea’s progress newsworthy?
South Korea is a small place, based on land cover, but is one of the top 10 carbon emitters and to commit to a three year pilot program that intends to cap the amount of carbon released is a huge step for an industrialized country. Data gathered from The World Bank and the United States Census Bureau in 2010 indicates that South Korea – a country that is 38,700 square miles in area with a population of 48,636,068 people – produced 1.81% of the world’s carbon emissions. Compare that to America which is 98 times larger in size with a population 309,326,225 people, producing 17.3% of the world’s carbon emissions, second to China. These numbers are rough, however; it is undisputed that the United States produced significantly more greenhouse gas (GHG) emissions. From some simple calculations with these number, if South Korea were the same size as the United States, it would have produced 1,438 kt of carbon per square mile, 1000 times more than what the United States emitted in 2010. Basically, this shows that for such a small country, South Korea emits a tremendous amount of carbon dioxide and a reduction would greatly benefit the wellbeing of citizens of the globe.
South Korea has shown other initiatives to “go green” on a local level such as the 30 day pledge to go car free in the city of Suwon (located just South of the Capital, Seoul). Though this initiative seems very simple and perhaps childish, it’s something that many cities of this size – population approximately one million – rarely try.
What are the implications?
If it could simply be said that “if South Korea can do it, so can we” life would be easy, however, the political structure, historical government involvement, and size of the country introduces nuanced complications and simplicities with such a leap in environmental stewardship. That said, this is a tremendous leap that has the potential to benefit participating countries in the future as well as demonstrate a successful and expansive carbon trading market that more industrialized nations could follow and participate in; South Korea’s ambition can be seen as a call to action.
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