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Biz groups urge gov't to reconsider cap-and-trade program

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(Globalpost/GlobalPost)

SEOUL, June 1 (Yonhap) -- South Korea's large business lobby groups urged the government Sunday to reconsider plans to set quotas for greenhouse gases that a company can release into the atmosphere, claiming such a move will undermine corporate competitiveness.

In a joint statement released by the Federation of Korean Industries (FKI), businessmen said the emissions trading system, announced by the environment ministry last week, puts too much burden on companies and could lead to a maximum 28.4 trillion won (US$27.8 billion) in extra outlays for them in three years.

Under the plan, Seoul will set up a market that will allow emissions rights trading as starting Jan. 1, 2015. The market, to be established at the Korea Exchange, will help regulate emissions quota for energy-intensive large businesses and allow those that have made cuts to sell the remaining emissions rights, as they would stocks and bonds. Companies that failed to meet emissions limit can buy such rights that will permit them to avoid paying stiff fines.

At present, only the European Union (EU) and New Zealand operate the trading scheme.

"Countries that emit the most greenhouse gases such as China, the United States and Japan do not have such systems, so if South Korea adopts the system, it will inevitably lead to a drop in global competitiveness for local companies," an FKI official claimed.

Last year, China and the United States accounted for 28.6 percent and 15.1 percent of all greenhouse gases released into the atmosphere, with Japan making up 3.8 percent. South Korea contributed 1.8 percent of the total.

The business community said extra outlays will come in the form of fines, costs of buying emission rights, and money used to capture and reduce levels of emissions. It said some companies may even be forced to cut back on production to avoid exceeding their quota, which can hurt economic growth.

In addition, company executives said Seoul's plan can further hurt companies because they will be held responsible for indirect emissions caused in the production of electric power. It pointed out that even the EU does not have this clause since it translates into a "dual burden" for power producers and ordinary companies.

Another area that can lead to extra costs involve the 13 trillion won in extra outlays that the country's power generation sector will have to deal with. Such a development can invariably lead to a rise in consumer electricity prices.

The FKI and other lobbies said there is a need to buffer the shock to the economic sector by marking up the allowable greenhouse gases that a company can release, adjusting emission quotas to reflect realistic market conditions and drop the indirect emissions plans that are unnecessary.

"For the emissions trading scheme to work and help curb global warming, China and the United States must take part in the overall process," said Yoo Hwan-ik, a senior economist at FKI. He said Seoul should first hold detailed talks with related parties before jump headlong into the process that can lead to considerable fallouts.

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http://www.globalpost.com/dispatch/news/yonhap-news-agency/140601/biz-groups-urge-govt-reconsider-cap-and-trade-program