• Environmental and Resource Economics Review
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• v.33 no.2
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• pp.179-201
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• 2024

In introducing emissions trading schemes, many countries start with a high level of free allocation to reduce the sudden cost burden on companies and increase acceptance of the policy. The free allocation is then gradually reduced, considering the risks of carbon leakage. This aligns with the "polluter pays" principle and is often considered one of the elements of an advanced emissions trading scheme. In this context, this study uses a simple emissions trading market model to show that decreasing the free allocation rate may not be desirable if the emissions market is not perfectly competitive. In particular, by identifying the existence of a free allocation rate at which the cost inefficiency is minimized, this study demonstrates that having a low level of free allocation does not necessarily imply the improvement of the emissions trading scheme.

• Environmental and Resource Economics Review
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• v.24 no.3
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• pp.489-522
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• 2015

According to Law on Allocation and Trading of GHG Allowances of 2013 in Korea as well as the 2014 National Master Plan for Korean Emissions Trading System, the System should be designed to minimize the change in the market positions of the affected firms. In this paper, we investigate how that principle might become ineffective by the ways of distributing allowances and applying different accounting methods using a Cournot duopoly model. Although the way of allocating allowances freely to firms combined with accounting them for having no values would minimize their market positions, it would not the most cost-effective way of GHG reduction since it does not provide financial market with accurate informations.

• Journal of Environmental Policy
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• v.8 no.4
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• pp.95-124
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• 2009

This study aims to introduce greenhouse gas emission trading in Korea as a highly cost-effective mechanism for controlling emissions. The Basic Act on Low-Carbon Green Growth will cover methods of emissions allocation, national inventory, and trading systems (i.e. emissions trading platforms, national registry,and clearing and settlement platforms). The Korean emission scheme will be based on the Korean Climate Change Act proposed by the National Assembly and Government with a cap-and-trade scheme. The national allowances will be allocated by the hybrid system. To establish the national inventory, TRADEMARKS (Telemetering System) and emissions factors are effective for greenhouse gas emissions measurement. It will likewise be effective for the national registry to be implemented via a Korean Integrated Registry, the emissions trading platform via the KRX (Korean Exchange), and the clearing and settlement platform via the KSD (Korean Securities Depository). In other words, the KRX will manage product development and marketing for Korean Carbon Financial Instruments (including commodities, futures, and options contracts) listed and admitted to trading on the KRX. All emissions trades will be standardized and cleared by the KSD.