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S Korea, China To Cooperate On Carbon Taxation

by Mary Swire,, Hong Kong

28 December 2015

On December 21, the Korea Exchange (KRX) and the China Beijing Environment Exchange (CBEEX) signed a memorandum of understanding (MOU) for cooperation on carbon emissions trading.

KRX is the operator of the country's main stock exchange and of its emissions trading scheme (ETS), which commenced on January 12, 2015. South Korea, the world's seventh-largest carbon emitter, now has the world's second-largest ETS market, after the European Union.

The ETS imposes a cap on greenhouse gas (GHG) emissions by over 500 of South Korea's largest companies, who are responsible for about 65 percent of the country's carbon emissions. During the first three years of the scheme's operation, from 2015 to 2017, companies and energy producers are allowed 100 percent of their benchmarked emissions limit without charge. They have to purchase credits if they wish to exceed their limits. Those that do not use their quota may sell their excess credits.

CBEEX was launched in November 2013. China is currently operating a pilot scheme through seven regional trading venues (five cities: Beijing, Tianjin, Shanghai, Chongqing, and Shenzhen, and two provinces: Hubei and Guangdong). It plans to have a national ETS in operation from 2017, when it would then have the biggest carbon market in the world.

In the pilot scheme, a cap is set on the total amount of GHG emissions in the trading venue, and then the limit is allocated to companies involved in the scheme in the form of carbon credits, based on historical data. Firms receive the initial credits for free, but those with excessive emissions will then have to buy credits from others.

Given the similarities between their schemes, KRX and CBEEX have decided to build a cooperative partnership for the development of their emissions markets.

The MOU covers market information exchange and the sharing of experiences. They have also agreed to explore how their markets could be linked, expanding upon ETS membership, the development of innovative carbon-related products, and joint seminars or forums. They will also cooperate on education and marketing activities.

TAGS: environment | compliance | tax | business | China | agreements | memorandum of understanding (MOU) | carbon tax | Korea, South | Europe

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