Permits in South Korea’s new carbon market were bid continuously at 10,100 won ($9.19) this week, but the offer side remained empty as emitters are wary of entering the market while a wave of companies protest that they have been given too few allowances.

The Korea Exchange (KRX) said spot Korean Allowance Units (KAUs) closed at 10,100 won Friday, up 100 won on the previous week, though the price remains theoretical as no trades have been recorded since Jan. 16.

“I don’t expect much change to be honest as companies are still preparing their carbon trading strategies and also because most companies are short and therefore unlikely to offer volume,” one trader said.

Nearly half of the companies covered by the scheme complained to the government about low allocation levels in January. Metals producers have already filed a lawsuit, while chemical firms are considering following suit.

One broker told Carbon Pulse that even companies that may normally have been willing to sell allowances would be careful doing so at the moment, fearful of being accused of exaggerating their complaints.

The dearth of supply is made worse by the fact that no offsets have yet been issued. One project has won government approval, and the first issuance may take place in late March or early April, market participants said.

“I think volume will only pick up once the government releases market stability reserve volumes to public finance companies. I expect that this volume will then go through the Korea Exchange,” the trader said.

In the allocation plan for the 2015-2017, the government has set aside a reserve of around 15 million KAUs, which could be injected into the market if deemed necessary.

If the government decides to use the reserve it would most likely come to market via the four public finance institutions allowed to trade in the ETS: Korea Development Bank, Korea Exim Bank, Korea Finance Corporation and the Industrial Bank of Korea.

By Stian Reklev – stian@carbon-pulse.com