Market Analysis during the First Year of Korea Emission Trading Scheme

Abstract

To derive the supply and demand issues during the first phase of the Korea Emission Trading Scheme (KETS), we investigated the excess or shortage, and the carry-over inflow of carbon emission permits for all of the domestic industries and major corporations. In particular, this study explored the supply and future prospects of offset credits, as well as the allocated permits, by forecasting the inflows of offset credits using the amount of certified reduction in domestic boundaries and overseas sources. We observed both the supply and demand of permits and changes in carbon dioxide (CO2 ) emission levels during the first phase (2015-2017) by comparing the estimated emission levels and the total permit supply. The results showed that permits were either in surplus or insufficient, depending on the sub-sector, and that a surplus in the supply of permits would occur if companies do not carry over more than 70 million tons of permits to the next period.