A number of foreign-owned firms are pulling planned investments in South Korea due to high costs imposed by the nation’s emissions trading scheme, an industry lobby group survey claimed Tuesday, according to local media.
A survey by the Federation of Korean Industries (FKI), South Korea’s biggest lobby group, said a number of foreign firms are choosing other Asian locations, such as China and Taiwan, over South Korea for R&D projects due to the high carbon price, the Korea Joongang Daily wrote.
“The Korean office of a European company that asked not to be identified may lose an R&D project worth 900 billion won ($838.8 million) because the carbon trading system forces it to purchase extra carbon credits, according to the FKI,” the paper wrote.
A manufacturer had shut down its production line and moved to China, as staying in Korea would mean closing down business 27 days a year to meet carbon targets, the survey said.
The ETS was launched in January as the main part of the government’s plan to reduce its GHG emissions to 30% below BAU levels by 2020.
Korean Allowance Units (KAUs) are currently valued at 10,300 won ($9.62) on the Korea Exchange, although no trades have been reported since Jan. 16 amid a dearth of supply.
“Companies have been given small amounts of carbon credits, not even enough for their own use, so selling it in the market is impossible,” one FKI official told the paper.
On Tuesday, 200,000 Korean Carbon Units (KCUs), the domestic offset credits, traded on the exchange at 10,550 won.
Several industry associations have sued the government in a bid to see their allocation increase, but so far the Ministry of Environment, which runs the ETS, has refused to give in to industry pressure.
A FKI survey released earlier this month said the ETS was domestic industry’s second biggest concern.