Total Emission Allowance Reduced and Paid Allocation Expanded... Government: "All Revenue to Support Industry"

Ministry of Environment Holds Briefing on Fourth Emission Allowance Allocation Plan
Average Annual Allowable Emissions Set at 507.46 Million Tons
16.8% Decrease Compared to Third Allocation Plan
Including Market Stabilization Reserve Increases Co

On the 30th, the 4th National Emission Allowance Allocation Plan briefing session was held at the Specialized Construction Hall. Photo by Kang Heejong

The government announced that the total allowable greenhouse gas emissions will be significantly reduced during the fourth planning period from 2026 to 2030. In addition, the proportion of paid allocation in the power generation sector will be gradually increased to 50%, intensifying pressure on electricity rates. As a result, companies are facing the dual burden of investing in greenhouse gas reduction and coping with rising electricity costs. The government stated that all additional revenues generated from the expanded paid allocation will be fully reinvested to support the industrial sector.

On September 30, the Ministry of Environment unveiled this plan at the briefing session for the fourth National Emission Allowance Allocation Plan held at the Specialized Construction Hall in Seoul. The Ministry explained that following a public hearing on September 12, it collected opinions from the industry and coordinated with relevant ministries before finalizing the government proposal.

Under the fourth allocation plan, the government intends to designate a total of 772 companies, including 764 mandatory participants and 8 voluntary participants, as allocation entities.

The total emission allowances for the fourth planning period will amount to 2,557,295,393 tons, with the total allowable emissions set at 2,537,295,393 tons. An additional reserve of 20 million tons will be allocated outside the total allowable emissions.

The average annual total allowable emissions will be 507.46 million tons. This represents a reduction of 102.24 million tons (16.8%) compared to the average annual total allowable emissions of 609.7 million tons during the third allocation period. As the total allowable emissions decrease, companies will face a greater burden to reduce greenhouse gas emissions.

Of the total allowable emissions, 2,344,977,255 tons (92.4%) will be allocated in advance, while 103,277,328 tons (4.1%) will be reserved for market stabilization purposes. The reserve for other uses will be 89,040,810 tons. In this fourth allocation plan, the market stabilization reserve is included in the total allowable emissions, which means companies will feel an even greater burden to reduce greenhouse gas emissions. In the third planning period, 14 million tons of market stabilization reserve were allocated outside the total allowable emissions.

During the fourth planning period, the advance allocation for the power generation sector will be 793,584,260 tons, accounting for 31.6% of the total, while the advance allocation for sectors other than power generation will be 1,551,392,995 tons, accounting for 61.6% of the total.

The proportion of paid allocation in the power generation sector will be raised step by step: 15% in 2026, 20% in 2027, 30% in 2028, 40% in 2029, and 50% in 2030. For sectors other than power generation, the paid allocation ratio will remain at 15% during the fourth planning period, while industries classified as carbon leakage and special industries will receive 100% free allocation.

Power generation companies have expressed concerns that an increase in the paid allocation ratio will lead to greater financial burdens. If the burden on power generation companies increases, it could be passed on to electricity rates. Over the past three years, electricity rates for the industrial sector have risen by more than 70%, and companies now face the dual challenge of expanding investments for greenhouse gas reduction and dealing with rising electricity costs.

On this day, the Ministry of Environment announced that all additional revenues from the increased paid allocation during the fourth period will be fully reinvested to support the industrial sector. The government also plans to expand climate finance, offering preferential interest rates for investments in facilities related to greenhouse gas and energy reduction.

An official from the Ministry of Environment stated, "The newly established Ministry of Climate, Energy and Environment will strengthen support for industry reduction efforts through the Climate Response Fund and the Electric Power Industry Fund."

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