South Korea Carbon Price Could Skyrocket, Analysts Say

The South Korean government’s unwillingness to amend estimates of future greenhouse gas emissions could push its carbon price up to $93 per metric ton of CO2 , nearly 10 times higher than in Europe, when its cap and trade scheme launches in 2015, according to a report by Thomson Reuters Point Carbon.

Emissions from sectors covered by South Korea’s emissions trading scheme such as power generation and manufacturing could be about one-third higher than the government’s estimates, according to the Point Carbon report.

Last month, the South Korea’s environment ministry chose to stick with a previous forecast on how much CO2 the country would emit in 2020 under a business-as-usual scenario, reported Reuters. The BAU projection will determine the cap on emissions for about 400 of the country’s biggest firms when the emissions trading scheme launches Jan. 1, 2015.

The emissions trading scheme is at the heart of South Korea‘s efforts to meet a national target of cutting emissions by 30 percent below BAU levels by 2020, Reuters reported.

While South Korea’s stance could cause carbon prices to be unnaturally high, California and Europe suffer from the opposite problem. A Point Carbon report released in September 2013 finds that California’s greenhouse gas output is already lower than the cap the state set for 2015, and that the state will remain below the cap until at least 2017. This will push down carbon prices, with allowances reaching only $15 in 2020.

In California’s August auction, emitters paid a lower-than-expected $12.22 per metric ton. California carbon prices are expected to remain low through 2020 due to excess permits, which will limit the revenue the state will raise through its carbon auctions.

California carbon market partner Quebec saw 12 percent lower than anticipated carbon prices, according to analysts at Thomson Reuters Point Carbon. This means prices for the linked market will be just above the action floor price of $11.34 a metric ton in 2014.

Europe has suffered from this problem for some time and lawmakers there are desperately trying to prop up the system. Carbon prices in Europe are about $9 per mt.

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