Ministry of Environment Revises Enforcement Decree to Restructure Free Allowance Criteria for Greenhouse Gas Emission Sectors...

[Asia Economy Reporter Kim Bo-kyung] The government is revising the criteria for industries and companies eligible for free allocation of greenhouse gas emission allowances to accelerate greenhouse gas reduction.

On the 11th, the Ministry of Environment announced that the full amendment decree of the "Enforcement Decree of the Act on Allocation and Trading of Greenhouse Gas Emission Allowances," which includes these details, was approved at the Cabinet meeting and is scheduled to be promulgated and immediately enforced within this month.

Greenhouse gas emission allowances refer to the permitted amount allocated to individual emitting companies within the total allowable greenhouse gas emission quota set considering the national greenhouse gas reduction targets.

The revised enforcement decree reorganized the criteria for industries and companies eligible for full free allocation of emission allowances. The criteria were changed to allocate emission allowances fully free of charge to companies belonging to industries with a value of cost incidence multiplied by trade intensity of 0.002 or higher, and to local governments, schools, medical institutions, and public transportation operators closely related to citizens' lives.

Newly included in the free allocation industries are sewage and wastewater treatment businesses operated by local governments, land passenger transportation, road freight transportation, maritime transportation, and grain processing industries.

Under the current criteria, companies belonging to industries with either trade intensity ≥ 30%, or cost incidence ≥ 30%, or trade intensity ≥ 10% and cost incidence ≥ 5% receive full free allocation of emission allowances.

With this revision, the number of free allocation industries will decrease by seven compared to the 2nd plan period (2018?2020). Seven industries, including rubber product manufacturing, automobile engine and automobile manufacturing, and dismantling, sorting, and raw material recycling, will be converted to paid allocation.

During the 2nd plan period, 36 out of 62 industries received free allocation, and in the 3rd plan period (2021?2025), 29 out of 69 industries will receive free allocation.

Additionally, following the legal amendment in March that changed the allocation unit from facilities to business sites, companies can now use reduction measures more flexibly within the emission allowances allocated at the business site level.

If emissions at a business site increase beyond the allocated amount due to the establishment or expansion of facilities within the site, additional emission allowances can be allocated.

If emissions at a business site decrease to 50% or less of the allocated amount due to suspension, stoppage, or closure of facilities within the site, the reduced amount of emission allowances will be canceled.

Previously, emission allowances were allocated at the facility level, so when a company replaced a low-efficiency facility with high emissions with a new facility with lower emissions within the business site, the emission allowances for the existing facility were canceled, and the company had to apply for additional emission allowances for the new facility.

Moreover, when emissions decreased due to replacement with a high-efficiency new facility, the company received fewer additional emission allowances than before, causing a problem where the allocated amount decreased despite the company's reduction efforts.

This revision reduces the burden of having to go through emission allowance cancellation and additional allocation procedures every time there is a change in some facilities within the business site.

From the 3rd plan period, brokerage firms such as securities companies can also trade emission allowances.

Until now, only designated companies and market makers could trade emission allowances, limiting market liquidity due to a lack of trading participants. Market functions did not operate smoothly, with imbalances in supply and demand causing buying or selling concentration.

From the 3rd plan period, the expansion of trading participants to include emission allowance brokerage firms is expected to enrich liquidity in the emission allowance market and alleviate supply-demand imbalances, leading to more active emission allowance trading.

Other changes include setting reasons for cancellation of designation as a designated company, requiring verification by a verification agency when submitting emission calculation plans, and newly establishing work standards for verification agencies and verification auditors.

The Ministry of Environment plans to establish the national emission allowance allocation plan for the 3rd plan period reflecting these enforcement decree amendments and complete the allocation of emission allowances by company within this year.

Jang I-jae, Director of the Climate Economy Division, said, "This enforcement decree amendment will accelerate greenhouse gas reduction, and as reduction pressure increases, we will also expand support projects using revenue from paid emission allowance allocation."

This content was produced with the assistance of AI translation services.