▪ Carbon pricing reflects the social cost of greenhouse gas (GHG) emissions and is implemented globally to reduce these emissions.
▪ Korea has operated ETS since 2015.
▪ This study assesses the current status of the GHG ETS and offers insights for future policy directions in anticipation of the Basic Plan announcement.
▪ The number of covered entities and the percentage of paid allocation have increased over the plan periods.
▪ Major net buyers of allowances include conversion sectors (electricity/heat generation), waste, and public sectors, while industry and transportation sectors are typically net sellers.
▪ In the industry sector’s surplus allowances, driven by economic slowdown and high free allowance rates, contributed to declining emission allowance prices.
▪ Emission allowance prices have shown a declining trend since 2022.
▪ Korean allowance prices remain lower than international markets.
▪ The 2035 NDC must set stronger reduction targets than the 2030 NDC, with ETS playing a vital role in reducing national emissions.
▪ Carbon leakage prevention measures must accompany the expansion of paid allowances.
▪ The increased revenue from expanded paid allowances requires proper planning within the Climate Response Fund.