[Opinion] The Carbon Market

A recent news report went as follows: “Today’s transaction price closed at 28 euros. It peaked at 30 euros, but stabilized as the futures option neared maturity.” It wasn’t a news report on oil prices or stock markets. It was a report on the price for the right to emit a ton of carbon dioxide, the culprit of global warming.

You can hear such reports frequently in Europe, where the carbon market was first created in 2002. Last year alone, carbon credits for 450 million tons of carbon dioxide were bought and sold in European Climate Exchange (ECX) opened in 2005 in Amsterdam. The transaction amount has exceeded 9 billion euros.

According to the Kyoto Treaty signed in 1997, advanced countries, including the EU and Japan, must reduce their CO2 emissions 5.2 percent from their 1990 levels during the first commitment period that runs from 2008 to 2012. Countries that cut emissions by more than their quota can sell their remaining carbon credits to companies in other countries. Conversely, countries that fail to meet their reduction targets must buy carbon credits or face fines (40 euros per ton in Germany). As such, the emissions trading system is a market mechanism that helps reduce greenhouse gas emissions.

As next year is the first year of the commitment period, carbon credit prices are rising. The United Nations Inter-Governmental Panel on Climate Change said that the carbon credit price should reach at least $100 per ton to cut 20 percent of greenhouse gas emissions by 2030. This means that carbon credits translate into money in an economy dealing with climate change.

As part of their strategies to dominate the carbon market, DuPont and Shell are reducing their greenhouse gas emission and increasing their investment in developing new and renewable energy sources.

SK Energy is planning to register its reduction of greenhouse gas emissions from its Seongam landfill in Ulsan with the UN to secure carbon credits for Korea. SK Energy, POSCO, and KEPCO are moving to invest in Korea’s first carbon fund introduced in August. The world is moving quickly to tackle climate change. It can be either a crisis or an opportunity for companies, depending on how they respond.

Chung Sung-hee, Editorial Writer, shchung@donga.com