S. Korea caves to pressure to delay carbon emission trading

The decision is a breakthrough for powerful export-led conglomerates, which have been pushing for a delay given competitor nations such as Japan and the United States have delayed or shelved emissions trading schemes for now.

“It is no longer an issue whether or not the government would implement cap-and-trade systems. We aim to get parliamentary approval on the bill before its general session,” Kim Sang-hyup, a secretary to the President for green growth, told Reuters in an interview.

Parliament's general session begins on Sept. 1 each year.

The revised bill, which would be presented to parliament later this month, would include an increased percentage of free carbon allowances from the 90 percent originally planned, but not as high as 100 percent, Kim said.

Under the original plan, the remainder would be auctioned, with the proportion to be auctioned to increase over time after the first phase. Europe's US$100 billion emissions trading scheme, the world's largest, covers nearly half of all EU emissions and relies on member states allocating emissions allowances to 11,000 industrial installations. Companies get most permits free now but many power generators will have to pay for all of these from 2013 in the scheme's third phase.

South Korea's scheme would cover about 60 percent of the nation's greenhouse gas emissions. If passed by legislators, it could become the region's second cap-and-trade scheme after New Zealand's.

The government initially set a plan for a three-phase cap-and-trade scheme, with the first phase starting in 2013 to run through 2015, then two subsequent phases running for five years each from 2016.

South Korean President Lee Myung-bak earlier on Monday urged flexibility on the trading plan, saying the government would introduce the scheme “at an opportune time after thoroughly sounding out the opinions of industries.”

Major business groups on Monday filed a petition to the government calling for a moratorium on the plan. The petition said full-fledged trading could cost up to 14 trillion won (US$12.57 billion) to South Korean manufacturers if 100 percent of credits were eventually provided at a cost via auctioning.

Emissions from South Korea's economy have doubled since 1990, are slightly larger than Australia's nearly 600 million tons and, on a per-capita basis, are on par with some European nations.

The government aims to reduce greenhouse gas emissions by 30 percent from projected levels by 2020. Under emissions trading, a government sets a cap on carbon pollution and relies on an ever-decreasing supply of permits for each ton of emissions to push companies to become more efficient. To help soften the impact, permits can initially be given out for free and then move towards full auctioning.

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