By Kim Hyun-cheol
Staff Reporter
Korea lags far behind key competitors in preparations for a ``low-carbon'' era and unless it starts efforts in earnest could find itself back in the 19th century scenario, swamped by big powers in a world where the environment has become the defining norm, a report warned.
According to the Samsung Global Environment Institute Center (SGEIC), the Korean economy falls short of other advanced countries in this regard. ``It's about time Korean companies started to built a new `low-carbon' social and economic system with its own technology. A painful history could repeat itself unless full preparation is made,'' it said.
It is estimated that Korean companies will spend at minimum $240 million in carbon credit purchases annually to meet the U.N. target in 2015, with amounts likely to spiral upward.
Park Chan-woo, research head of the institute said, ``Carbon markets will not only deal with rights for emissions but create new business linked to global warming.''
Unlike the United States, China and Japan, Korea has no carbon trading market.
The United States has an established carbon market despite not signing the Kyoto Protocol. China, expected to be the world's biggest carbon-emitter soon, is actively participating in the market while Japan is focusing on capitalizing on the creation of emission rights instead of trading.
The Korea Energy Management Corporation has started a similar business, in which the state-run company buys the amount of carbon emissions voluntarily reduced by local companies, but still no rules are set on trading and the price is well below the current global level.
Local industries, in particular, are expected to shoulder a big financial burden to meet the goal set by the pact.
Launching the carbon trading market is urgent by 2009, when the post-Kyoto Protocol pact is expected to be completed, Park added.
Emissions trading is a system used to control pollution by providing economic incentives to firms reducing emission of pollutants. It is sometimes called cap and trade.
The market is mostly based on the Clean Development Mechanism and other measures of the Kyoto Protocol, which enable governments and companies to trade their rights to exhaust greenhouse gases.
In emission trading, a government or international body sets a limit or cap, on the amount of pollutant. Companies are required to secure ``credits,'' which mean the right to emit a specific amount. The total amount of credits can't surpass the country's whole cap.
Companies increasing emission beyond pre-set limits must buy credits from less pollutant firms.
The market has already become a big battlefield for global financial players. Last year, Morgan Stanley decided to invest as much as $3 billion in the business, and also bought a 38 percent stake in MGM International, a Miami-based carbon-reduction business company.
Credit Suisse has taken a 10 percent stake in carbon project developer EcoSecurities Group of Ireland for 44 million euros in July last year, following Citigroup, Merrill Lynch, as well as Morgan Stanley.
The market was sized at $549 million in 2004, then snowballed to $1 billion in 2005 and over $3 billion in 2006. The U.N. predicts the market will reach $2 trillion by 2012.
South Korea is exempted from the reduction duty by 2012, as the country is categorized as a developing economy under Kyoto Protocol. Analysts, however, warn the world's sixth largest greenhouse gas producer will be under pressure to join the plan around 2013, when the second phase of the protocol commences.
President Lee Myung-bak said at G-8 summit in Toyako, Japan, Wednesday that South Korea will halve its carbon emissions by 2050 and pledged to launch a full-scale campaign to foster a low emission society.
Lee also proposed a new regional organization of ``East Asia Climate Partnership'' for South Korea and its neighboring countries to address global climate change together.