K-ETS Progress & Operational Status. 22 October 2018

Transcription

1 K-ETS Progress & Operational Status 22 October 2018

2 1. Carbon Pricing Mechanism in Korea GHGs: 125kt, Energy: 500TJs GHGs: 87.5kt, Energy: 350TJs Approx. 592 Companies(`17) (GHG Emission over 125kt) 1 st Stage Allocation Plan for Phase II(2018) established 2 nd Stage Allocation Plan for Phase II( ) established 5 yrs for each Phase from Phase III Allow 3 rd party participation 2014 ~ GHGs: 50kt, Energy: 200TJs * TMS : GHG Emission & Energy Consumption Target Management System Link to other ETS 1

3 1. Target Management System Features - Command and control - Target setting through consultation with assigned companies - Companies emitting over 50kt of GHG and consuming 200TJs of energy / Facilities over 15kt, 80TJs Governance - MOE oversees operation of TMS (Rule-setting, Monitoring each ministry) - Each ministry regulates their designated sectors 2

4 1. Target Management System Process cycle of TMS Year T Year T+1 Year T+2 Year T+3 Assignment ( ~ 30 Jun.) Statement report( ~ 30 Mar.) Target setting ( ~ 30 Sep.) Implementation plan report ( ~ 31 Dec.) Implementation (1 Jan. ~ 31 Dec.) Implementation result report ( ~ 30 Mar.) Verification (1 Apr. ~ ) 3

5 2. Preparatory stage for ETS Development of MRV for individual companies - Establish and consolidate MRV system before the start of ETS - Make the Government and companies better understand MRV system Information Collection - Understand individual, sectoral and general GHG emission status through the reports - Identify potential subject entities of ETS 4

6 Comparison of K-ETS and TMS Type Regulation Regulated gases Threshold Period Allocation MRV Early action offsets Banking /Borrowing) Trading Penalty Market Mechanism (Pricing) Allocation 6GHGs Emitters of 25KtCO 2 -eq or more Voluntary participants 3~5 years Free allocation + auctioning (1 st phase(`15~`17): free allocation) Operational guidelines, 3 rd party verification Considering total amount of permit, 10% Allowed Allowed Penalty to emissions non-compliance Command and Control Regulation 6 GHGs, energy consumption >25ktCO 2 (~ ) >20ktCO 2 ( 11.1~) >15ktCO 2 ( 14.,1~) 1 year Free allocation (Grandfathering, Benchmarking) Operational guidelines, 3 rd party verification Determined by contribution factor, no guidelines Not allowed Not allowed Penalty under KRW 10mn 5

7 1. Scope K-ETS includes Scope 1 + Scope 2 Types of GHGs - Carbon dioxide(co2), Methane(CH4), Nitrous Oxide(N2O), Hydrofluorocarbons(HFCs), Perfluorinated Chemicals(PFCs), Sulfur Hexafluoride(SF6) Types of emissions : Direct emissions - GHGs emissions by combusting fuel or using F gas, etc. Types of emissions : Indirect emissions - GHGs emissions by using electricity or steam supplied by others 6

8 2. Sectors K-ETS covers various sectors including industry, building, transport, energy sectors public Industry sector as basic coverage - More than 70% of the entities in K-ETS system is in industry sector Building sector - Building and communications are included in this sector, to mitigate emissions from buildings and communications industry 7

9 2. Sectors Transport sector - Aviation industry is included in transport sector Energy sector - To include emissions from power generation, power and energy entities are subject to K-ETS Public and waste sector - Public services such as water supply, waste and wastewater treatment has carbon costs - So public and waste sectors are subject to K-ETS too, to internalize those carbon costs and enhance efficiency by mitigating GHG emissions 8

10 1. Allocation 100% free allocation through GF and BM methodologies 100% free allocation - As it was 1 st time introducing the ETS in Korea, 100% free allocation was intended to: - stabilize K-ETS and build experiences - ensure compliance of entities and related players Allocation methodologies - GF methodology was applied to most of the sectors - BM-based methodology applied to refinery, aviation and cement industries 9

11 2. Coverage 5 sectors, 23 subsectors, from 525 entities in 2015 to 592 entities in 2017 Sector Industry Building Transport Energy Public & Waste Subsector Mineral Food&beverage Textile Wood Pulp Refinery Petro-chemical Glass&ceramics Cement Steel Non-ferrous Metals Machinery Semiconductors Display Electronics Automobiles Ship-building Building Communications Aviation Power & Energy Water supply Waste 10

12 1. Allocation results 1,608 million tons of initial allocation, 1,685 million tons in total Unit : kt Categories SUM Initial allocation 543, , ,648 1,608,613 Additional allocation 9,091 16,105 26,326 51,492 Change of allocation Cancellation 13,351 20,615 10,620 44,586 Early action - 29,412 21,980 51,392 Change of plan ,643 18,643 Total allowances 538, , ,977 1,685,584 11

13 2. Reserved allowances 89,438kts compiled 75,581kts(84.5%) used Categories Market stability Other purpose Early action Total Unit : kt Allowances Compiled 14,316 23,730 51,392 89,438 Allowances Used (Used/Compiled) 4,938 (34.5%) 19,450 (81.9%) 51,392 (100%) 75,780 (84.7%) Allowances Left 9,378 4, ,658 12

14 3. Operational status of offset mechanism 252 methodologies registered, 139 projects approved, 22.4 million tons accredited Methodologies - Total 252 methodologies CDM (83.7%), 41 domestic(16.3%) - registered Project approval - Total 139 projects(90 CDM, 49 domestic) approved - 47 renewable energy, 24 N₂O reduction, 22 fuel conversion, 17 waste heat recovery, 10 landfill gas utilization, 10 SF₆ reduction, 9 other projects 13

15 3. Operational status of offset mechanism Accredited Credits - Total 22.4 mn tons from 82 projects accredited mn from N₂O reduction, 5.8 mn from landfill gas utilization, 4.5 mn from SF₆ reduction, 2.1 mn from renewable energy, 0.2 mn from fuel conversion KCUs (Korean Credit Units) Issued mn tons(68.5%) from 22.4 mn tons of accredited credits converted to KCUs and used for transaction or compliance 14

16 4. Compliance results 1,669 mn tons emitted, 16.6 mn tons (0.98%) of surplus allowances Unit : million t Categories Total Number of entities Total Allowances ,685.6 Amount of Emission ,669 Surplus/Shortage -3.9(0.7%) 6.5(1.15%) 14.0(2.39%) 16.6(0.98%) 15

17 4. Compliance results Status by entities entities (67.9%) had surplus out of 592 entities (2017) entities (32.1%) had shortage 16

18 5. Traded volume & price 85.1 mn tons, 1,712 bn KRW traded Categories ( ~ 9 Aug.) Total Traded volume (Mt) Total traded amount (bn KRW) ,712 Avg. Price (KRW) 12,028 17,367 21,131 20,374 - Traded volume, aggregate turnover : KAU+KCU+KOC, in and out of KRX system - Price : Price of KAU traded each year in KRX system 17

19 5. Traded volume & price Volume Price 18

20 1. Allocation Launch of auctioning and wider application of BM-based methodology Launch of auctioning - 3% of the allowances would allocated through auctioning in Phase II - 100% free allocation is applied for some of the industries considering international competitiveness or carbon leakage - Trade intensity and additional cost increase are considered to determine such industries for 100% free allocation 19

21 1. Allocation Launch of auctioning and wider application of BM based methodology Wider application of BM methodology - To promote investment for emission reduction and innovation - BM based methodology applied to 4 more industries (power, group energy, industrial complex, waste) along with 3 initial industries (refinery, cement, aviation) Total allocation - 1,796,133,085t of allowances are allocated for Phase II (1,642,980,666t of initial allocation) - Reserved allowances are 153,152,419t 20

22 2. Introduction of market maker (planned) Introducing market maker from 2019 is now in consideration Market maker - Invite public financial institutions as market maker - With actions to be taken by market maker, risk of low market liquidity could be reduced - Policy details such as type and level of incentives for market maker, institution, timing of introduction are now being considered Allowances for market maker - 5,000kt of allowances from 153,152,419 of reserved allowances are allocated for market maker 21

23 3. Emission reductions from abroad Emission reductions from CDM projects abroad with direct participation of domestic (Korean) entities are accepted as offset credits (2018 ~ ) Progress - Initially, reductions from overseas mitigation projects with direct participation were initially planned to be counted as offset credits from With related regulations amended in 2018, the timing was brought forward to 2018 Expected Impact - Promotion and spillover of mitigation techniques - Development of mitigation potentials in developing countries - Contribution to implementation of 2030 roadmap and NDC 22

24 1. Participation of 3 rd Party Accepting participation of 3 rd parties is planned for Phase III - Preparation of policy measures to prevent market abuse or interference - Maximize the benefit of market functions 2. ETS linkage Link with other ETS systems would be necessary, and also planned for Phase III - Promote international cooperation on MRV to guarantee equivalence of each credit - Regulation-setting - Contribution to implementation of 2030 roadmap and NDC 23

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