"Carbon Reduction Costs Vary by Industry"… Choi Tae-won Calls for Improvements to the 'Emission Trading System'

Meeting with Minister of Industry in Private
Specific Proposals for System Improvement... "Need to Consider High Carbon Emission Industries"

Choi Tae-won, Chairman of the Korea Chamber of Commerce and Industry, is delivering a welcoming speech at the 2nd Carbon Neutral Industrial Transition Promotion Committee held at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul on the 17th. Photo by Moon Ho-nam munonam@

[Sejong=Asia Economy Reporter Kwon Haeyoung] Chey Tae-won, chairman of the Korea Chamber of Commerce and Industry (KCCI), reportedly expressed the view that "the current emissions trading system does not consider the carbon reduction costs by industry at all," urging the government to differentiate carbon emission allowances by industry. While the industrial sector must align with the national carbon neutrality goals, the government should also reflect the difficulties faced by high-carbon industries such as steel and cement during the carbon neutrality implementation process.

According to the government and related industries on the 19th, Chairman Chey emphasized the need to reflect industry-specific characteristics in the emissions trading system during a private meeting with Moon Seung-wook, Minister of Trade, Industry and Energy, at the recently held '2nd Carbon Neutral Industrial Transition Promotion Committee.' The emissions trading system, introduced in 2015, is a mechanism where the government allocates carbon allowances (emission permits) to companies to reduce carbon emissions, and companies can buy or sell surplus or deficit allowances.

At the meeting, Chairman Chey pointed out, "Even if the same 1 ton of carbon is reduced, some industries can reduce it easily, while certain industries must invest significant effort and cost." He added, "Under the current system that allocates allowances without industry differentiation, companies that can easily reduce carbon sell their surplus allowances, while companies that find it difficult to reduce carbon inevitably end up purchasing allowances available on the market rather than making reduction efforts." In his opening remarks, Chairman Chey mentioned the introduction of 'incentives' for companies that perform well in carbon reduction, effectively proposing differentiated allocation of allowances by industry as part of these incentives.

For example, high-carbon emission industries such as steel and petrochemicals find it difficult to reduce carbon emissions. Although they are devoted to developing new technologies like low-carbon and carbon-free processes, commercialization is still far off. Currently, purchasing allowances to maintain carbon emissions is the best option. Ultimately, to further reduce carbon emissions across the entire market, Chairman Chey believes the system should be improved to allocate more allowances to high-carbon industries by considering carbon reduction costs by industry and to encourage accelerated technology development.

Under the current system, allowances are allocated regardless of industry. Only companies with an average annual carbon emission of 125,000 tons or more over the past three years or those with business sites emitting 25,000 tons or more are included in the emissions trading system.

Government officials reportedly strongly agreed with Chairman Chey’s remarks. An official from the Ministry of Trade, Industry and Energy who attended the meeting said, "It was clear that Chairman Chey has given a lot of thought to carbon neutrality," adding, "Since this was a forum to listen to industry opinions, we will discuss the suggestions with relevant ministries."

The industrial sector expects that the government’s aggressive carbon neutrality goals will immediately impact next year’s emissions trading market. Last month, the government set a target to reduce carbon emissions by 40% by 2030 and achieve net zero by 2050, and is preparing an implementation plan to achieve this.

Along with the government’s carbon neutrality goals and the European Union’s (EU) introduction of the Carbon Border Adjustment Mechanism (CBAM), domestic emission allowance prices have already surged. This underscores the need to improve the emissions trading system.

The Bank of Korea also recently stated in a report, "The EU is implementing policies that allocate free allowances to industries at risk of carbon leakage to maintain the competitiveness of its domestic industries," and added, "Carbon emission regulations for the steel industry should be introduced gradually."

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