July 18 (Reuters) - South Korea’s finance minister has called its impending emissions trading market “flawed in many ways”, hinting that he would pressure other ministries to delay the planned 2015 launch, a local newspaper reported.
Choi Kyung-hwan, who is also deputy prime minister, said problems had been found with the scheme, which is due to start in January, and that the government would review them before deciding whether to delay it, modify it or implement it as planned, The Korea Times reported on Friday.
South Korea’s finance, industry and environment ministries are divided over the scheme and its potential impact on the economy, a spokesman with the country’s environment ministry said, adding that nothing had been decided thus far.
South Korea’s carbon market has come under fire from businesses, who want its start delayed until 2020. Industry groups earlier this week warned that it could cost firms a total of 27.5 trillion to 29.6 trillion Korean won ($26.7-$28.9 billion) over the next three years.
The programme, which has already been delayed by two years from 2013, caps greenhouse gas emissions from over 400 of the country’s largest polluters such as power generators and manufacturers, with the aim of cutting carbon dioxide (CO2) output by 30 percent by 2020 from business-as-usual levels.
Choi’s comments come a day after Australia’s parliament voted to repeal its carbon tax, which would have evolved into an emissions trading market next July.
Under South Korea’s scheme, which could be the world’s second-largest if launched, emissions will be capped at around 547 million tonnes per year between 2015-2017, according to the environment ministry.
Firms will be given free allowances based on their historical CO2 output levels but must buy more in the market if their emissions exceed allocated levels.
The government has said it expects Korean carbon permits to trade at around $20 each, well above the $3-$12 range seen in markets in Europe, the United States, China and New Zealand.
But some analysts have warned that the market’s emissions cap will be too low and have forecast that the South Korean carbon price could rocket towards $98, which is the penalty firms have to pay per tonne if they don’t meet their targets.
Analysis firm Thomson Reuters Point Carbon estimated in March that CO2-equivalent emissions from the regulated sectors would grow to 618 million tonnes in 2020 under a business-as-usual scenario.
South Korea, Asia’s fourth-largest economy, pumped out 669 million tonnes of CO2-equivalent gases in 2010, making it the world’s eighth-biggest emitter.
$1 = 1029.3000 Korean Won Reporting by Michael Szabo in London, additional reporting by Meeyoung Cho in Seoul; editing by Jane Baird