Korea foresees slow start in emission rights trading

The Korea Exchange estimated on Monday that emission rights trading would struggle in the first quarter of 2016 and start picking up in the following quarter.

“The trading will gain vigor in March next year, the deadline for the assessment of emission rates, and will stay heated until late June, the deadline for the submission of emission rights,” Korea Exchange Vice President Yoon Suk-yoon said at a joint news conference of the state-run bourse and the Ministry of Environment.

The derivative market expert expected that at the launch of the new policy companies would adopt a wait-and-see strategy.

“Invigorating the trading market from the start would be difficult, because the traders likely will prefer using next year’s emission rights in advance, the standard tactics of market trading,” Yoon said. The emission rights trading system includes a flexibility option, which allows the companies to transfer unused emission rights or use next year’s in advance.

In order for the policy to launch successfully, the Korea Exchange plans to encourage the trading market by diversifying the tradable products. In addition to greenhouse gas emission rights, the main bourse plans to list similar environment rights, such as air pollutant emission rights.

The Korea Exchange is also considering extending the trading hours to the afternoon.

The press meeting came amid the government’s continuing support of the emission rights trading scheme as a part of the global environment project.

Regarding concerns that the policy may increase companies’ financial burden and drag down the economy, the Korea Exchange and the Environment Ministry countered by citing benefits such as an expected boom in the creation of new, low-carbon technologies.

The stock exchange called for a joint effort by all three parties ― the state financial institutions, the gas-emitting companies and the financial investors.

By Chung Joo-won (joowonc@heraldcorp.com)