Carbon trading begins amid controversy

South Korea launched on Monday its first emission rights exchange at the Korea Exchange’s Busan headquarters amid growing concerns among participating companies.

The trading has been established to combat climate change by allocating emission permits to companies according to their emission history. Firms whose carbon emissions exceed or come under the permitted amount can trade the rights.

The state-supported trade, monitored by the Korea Exchange, has been a bone of contention between the government and the private sector.

The policy, devised by the Ministry of Environment, has disgruntled the steel and petrochemical industries, and other large manufacturers with large production capacities that emit a lot of pollutants through a 24-hour heating process.

For the energy-concentrated industries, reducing the greenhouse gas emissions is directly related to how much power they use (in the production process,) eventually affecting the production capacity.

The state has been trying to keep the allocation low.

“Powerhouses, petrochemical firms and nonmetal manufacturers were the major three industries that asked us for higher allocations,” said an official of the Greenhouse Gas Inventory & Research Center of Korea. The GIR is the state-run think-tank that manages the allocation of emission rights.

The GIR has received a number of complaints from the companies during the 30-day objection period that ended on Jan. 2., but a significant number of them were “dismissed for being beyond the scope of consideration,” according to the GIR.

But the companies claim that the country needs higher allocations to balance productivity and regulation.

POSCO, the world’s fifth-largest steelmaker, is one of the companies that pleaded to the Environment Ministry to count 100 percent of its independent environment-friendly investment into the allocation. In 2009-2013 period, the steelmaker has invested about 480 billion won ($444 million) in enhancing the waste-heat-recovery system, expanding power generators that run on blast furnace top gas pressure and adding new coke-dry-quenching facilities.

“Retaining the same production capacity with reduced emission requires higher energy efficiency, but this needs technology, investment, and above all, time,” said a POSCO representative.

Similarly, shipbuilder Hyundai Heavy Industries said it has been discussing ways to cut down on its power use by replacing some of the old, low-efficiency facilities, adding that the investment could not be made so soon.

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