S.Korea to establish voluntary carbon credit exchange

South Korea will introduce a voluntary carbon market (VCM) later this year, which is expected to broaden the scope of carbon credits and speed up efforts to meet net-zero emission targets. 

The Korea Chamber of Commerce and Industry (KCCI) will begin the review and verification of decarbonization projects and issue carbon credits to relevant companies this month, according to the lobby group on Tuesday.

The new carbon credit market will supplement the government-run carbon exchange, which now issues credits only to permit carbon dioxide (CO2) emissions from companies' production processes.

Thus, the existing carbon market is used mainly by companies to balance their carbon emissions, with almost no retail investor participation.

The VCM will include carbon reduction projects, including producing low-power semiconductors that use less electric power than standard semiconductors, into its category of carbon credits.

SK Group’s tree-planting projects in developing countries can be certified as carbon offsets as well.

The KCCI will launch the decentralized carbon exchange as early as the second half of this year. Corporations, individuals and other investors will be able to buy and sell carbon credits on the VCM.

Their purchase of the certificates can also be included in sustainability management reports to demonstrate their commitment to environmental, social and governance standards, which could appeal to their customers.

Carbon credits will also represent carbon-neutral products such as carbon offset lubricants that SK Lubricants Co. has marketed in the US after purchasing CO2 certificates.

Under the current credit trading system, startups in South Korea can hardly promote their carbon offset products because they are not subject to carbon regulations.

Also, Korean companies need to go through foreign carbon crediting programs such as the US-based Verra and Switzerland-based Gold Standard to get their voluntary emission reductions certified. If approved, it takes one and a half years to receive their certificates.

Once the VCM is set up in Korea, the KCCI will shorten the certification process to six months. It will also join the world's leading verified carbon standard programs to comply with global standards.

In an effort to expand its footprint into other parts of Asia, the KCCI is in talks with the United Arab Emirates and other countries in the Middle East to open VCMs there.

Carbon credit issues leapt by more than 60% to 378 million tons in 2021 from 234 million tons the year prior.

In the US, about 400 million tons of CO2 emission credits are traded on the VCM. 

By value, the carbon credit market worldwide is projected to balloon by 100% to $50 billion by 2030 versus $520 million in 2020, according to Mckinsey and Ecosystem Marketplace, a US-based nonprofit foundation.

In a recent KCCI survey of the country’s 1,000 leading companies by sales, 67% of the respondents said the VCM will contribute to reducing greenhouse gas emissions.

Almost half of the survey participants, or 46.3%, picked the fair evaluation of carbon reduction projects as VCM's expected key role. 

Participants also expressed hope that carbon offset products, technologies and services would be assessed as part of the carbon reduction efforts.

Write to Ji-Eun Jeong and Jung-Soo Hwang at jeong@hankyung.com

Yeonhee Kim edited this article.