Experts debate pros and cons of cap-and-trade as crucial deadline slips by
This article originally appeared in The Korea Times in January 2012.
By Philip Iglauer
Government officials are debating passage of an emissions trading scheme (ETS), called cap-and-trade in the United States, as President Lee Myung-bak’s year-end deadline to pass key legislation slipped by and the country lost out to Qatar in its bid to host the U.N. Climate Change Summit in November.
Officials close to Korea’s climate change legislation said the bill has little chance of passing this year, too, as the nation looks to two elections, and with significant industries opposed to the bill in its current form. Bureaucratic infighting is another factor weighing against a bill that bolsters the authority of the Environment Ministry.
Korea’s global leadership on the environment, as well as the country’s long-term economic growth, could be at stake.
President Lee announced in a speech on Aug. 15, 2008 that “low carbon, green growth” should be the country’s new development strategy.
The government then started the wheels of that policy moving by setting a target to reduce green house gas (GHG) emissions, setting up the Presidential Committee on Green Growth in January 2009 and enacting the “Framework Act on Low Carbon, Green Growth,” which Lee signed in January 2010.
That bill allocated billions of dollars to its No. 1 strategy and No. 1 policy direction: To coordinate the president’s green strategy through “the mitigation of climate change and energy independence” and “the effective mitigation of green house gas emissions,” according to its Web site.
In addition to laying down a legislative foundation with the Framework Act, the government also set up the Global Green Growth Institute (GGGI), which worked to bring the public and private sectors on board with its green growth strategy. GGGI has been instrumental in promoting Lee’s green growth economic vision in Korea and abroad.
But the most ambitious piece of the president’s green growth agenda is floundering ― its emissions trading mechanism for a national greenhouse gas emissions quota and trading scheme.
The government reasoned lean and green would not only be good for the Earth, it would also pay dividends in paving the way for economic growth in the long term.
Professor Cho Hong-sik of Seoul National University said the emissions trading scheme is the best tool Korea has to pursue a green growth strategy, which in turn is vital for the country to face what he described as an economic “triple crunch,” Korea’s energy challenge, climate change challenge and declining economic growth rates since the 1990s.
“I have engaged myself in this issue from the beginning. I know about the green growth strategy, and to accomplish growth and this goal, we need good policy tools,” Cho said. “The most important tool is ETS.”
The government missed the deadline, and most observers see little chance of the National Assembly taking up emissions trading this year, with two big elections approaching and opposition by the country’s largest business lobby, even though significant concessions have already been made to industry.
The Korea Chamber of Commerce & Industry (KCCI), which represents 15 business groups and includes the country’s largest firms, asked the legislature to again revise the bill.
Cho said that although corporate opposition appears natural, it is short sighted. Korea is now importing more energy for ever-diminishing economic output, and some 85 percent of that energy is derived from the volatile Middle East and energy prices are subject to violent fluctuations.
For Cho, an emissions trading scheme is not just good environmental sense, it is a matter of the nation’s long-term economic survival.
Cho said the number of days with precipitation over 80 millimeters in Korea from 1970 has increased by a factor of four, causing extreme weather events and 1.8 trillion won to the economy, a 430 percent increase from the 1980s.
Middle countries like Korea are particularly vulnerable to disasters caused by extreme weather, according to a U.N. Intergovernmental Panel’s special report in 2011 titled, “Managing the Risks of Extreme Events & Disasters to Advance Climate Change Adaptation (SREX).”
The report estimated the disasters caused by extreme weather sapped 1 percent of GDP from middle countries from 2001-2006, compared with 0.3% for their wealthy nation counterparts.
Minister of Government Legislation Chung Sung-tae said, “It is necessary to pass the bill this year to implement ETS by the 2015 deadline,” in an interview with The Korea Times in November on the sidelines of international forum on environmental legislation in Incheon, 60 kilometers from Seoul.
The Korean government set a voluntary target of a 30 percent cut in emissions by 2020, and wants the bill passed by the year end to start the scheme from 2015.
For the last 20 years, local environmentalists and clean-energy activists have argued that the best hope of addressing climate change is for nations around world to come together under the auspices of the U.N. and recognize the threat that a superheated climate could pose to everyone, and then sign a legally binding treaty to reduce carbon pollution.
ETS is the system with the least sacrifice that will get the job done, Cho said.
“When compared to that of other systems, such as direct regulation and carbon taxes that have been established to reduce GHG emissions, two of the major advantages of ETS are economic efficiency and flexibility,” Chung said.
“The government believes that ETS is the most effective and efficient way to reduce GHG emissions at a national level. In the medium and long term, it is important to promote and the spread word that ETS can heighten the competitiveness of industries. Efforts are being put into place so as to pass the legislation at the National Assembly as soon as possible,” Chung said.
Currently 25 European countries and New Zealand have a national carbon trading mechanism in place on a national level. Korea would be the first East Asian country to enact such a mechanism if the bill passes.
Korea’s ETS bill was submitted to the National Assembly in April 2011.
Asked which companies oppose the bill, Han Yeong-soo, deputy director general at the Ministry of Government Legislation, said two industries in particular are opposed to ETS legislation.
“The electronics and steel industries are the principal opponents to the current bill,” Han said.
The government has already amended the legislation to increase free carbon allowances and softened penalties for non-compliance, after strong opposition from industry. Cho said the government already cut the mandatory emissions reduction from 15 percent to 5 percent to appease industry. A special legislative committee has been reviewing a revised bill since April 2011.
The Korean government, which set a voluntary target of a 30 percent cut in emissions by 2020, wanted the bill passed last year to start the scheme from 2015 and meet its reduction goals.
Cho said further accommodation could jeopardize the government’s carbon reduction goals.
According to Minister of Government Legislation Chung, it is essential to pass such legislation this year in order to build infrastructure and to properly establish the emissions trading markets.
“In addition, a positive signal needs to be generated to the industrial circles regarding the implementation of ETS through its enactment. It is crucial to thoroughly prepare in advance for the development of green technology and remodeling facilities,” Kim said.