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Despite climate pledges from governments…
A report compiled by Bloomberg New Energy Finance (BNEF) and Ernst & Young, states that South Korea’s new emissions trading scheme could be the most ambitious in the world, so much so that it actually appears impossible.
The cap and trade system, which will begin to take effect in 18 months time, will price carbon emission at $90 a tonne, with the aim of reducing the country’s emission by around 30 percent. Those are two massive figures!
Richard Chatterton, the leading analyst of carbon markets at BNEF, suggested that, “if the government implements the scheme without any changes, it will have major implications for Korean companies. A carbon price will lead to higher power prices and impose additional costs on industrial firms. The government is mitigating the impact for covered entities by handing out most allowances for free, but costs could still rise quickly.”
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The report believes that reducing the country’s emission levels by 30% before 2020 is far too ambitious, requiring a reduction of roughly 836 million tonnes of CO2 in five years. Such a number would require all existing coal plants to be replaced with new, clean natural gas plants, and renewable energy installations, as well as extra carbon capture and sequestration systems. In fact the report decided that the work needed actually exceeds the options available, making the target impossible to achieve.
Whilst the $90 a tonne carbon price seems likely, the reduction target will not be met.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com