Many important bills are gathering dust at the National Assembly as rival parties are still locked in a stand-off following the unilateral passage by the ruling Grand National Party of the Korea-U.S. free trade bill on Nov. 22. The emissions trade bill submitted by the government in April is one of them.
The legislation aims to launch a greenhouse gas emissions trading system in 2015 to stimulate corporate efforts for emissions reduction. In 2009, the Korean government voluntarily declared it would cut emissions by 30 percent on a business as usual basis by 2020. To attain this goal, corporate cooperation is essential.
The government originally planned to introduce emissions trading starting in 2013. But it had to delay its plan by two years in the face of stiff resistance from corporations. It also rewrote the original bill to sweeten its scheme.
Yet the corporate sector is hardly impressed by the government’s concessions. The Korea Chamber of Commerce and Industry recently said it would continue to oppose the government’s bill as it would put an additional burden on domestic companies.
The chamber estimated the additional costs on local companies at between 4.7 trillion won ($4.2 billion) and 14 trillion won per year. These costs, it asserted, would force some companies to relocate their plants abroad in a phenomenon called carbon leakage, causing a fall in employment and a rise in consumer prices.
There is no denying that emissions trading would put a strain on corporations. But it would give them benefits that more than offset the costs. In the first place, it would enable companies to cut emissions more cost-effectively than a system that goes into implementation next year.
Separate from the planned cap-and-trade scheme, the government will implement what is dubbed the greenhouse gas and energy target management system starting in 2012.
Under this system, the government sets obligatory emissions and energy consumption reduction targets for the nation’s 458 heaviest corporate polluters. Companies that fail to meet the targets face fines of up to 10 million won. In October, the government announced the initial targets that these companies have to meet next year.
This system has limits in curbing emissions. Unlike the cap-and-trade approach, it offers no economic benefits for companies that reduce emissions beyond their share.
Under an emissions trading system, a company that releases emissions below its given cap can earn profits by selling its licenses to pollute to other companies. This incentive is designed to motivate companies to invest in green technologies, which can emerge as a new growth engine.
Emissions reduction is no longer an option for Korean companies. It is a must for them. More than anything else, they need to cut emissions to improve their woefully low energy efficiency, which would in turn enhance their overall competitiveness.
This will also help them cope with the rising tide of “green protectionism,” which refers to protectionist measures being taken by countries in the name of environmental protection.
Hence, corporations need to see emissions trading in a more positive light. They should cooperate with the government to ensure the new system takes root in Korea. For their part, lawmakers need to handle the bill without further delay.
