20 brokerages to join carbon emissions trading market

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By Anna J. Park

The Korea Exchange (KRX) has allowed, starting Monday, 20 local brokerage houses to participate in carbon emissions trading in a move to stimulate the local version of this market.

The new traders include large sized brokerages such as NH Investment & Securities, Mirae Asset Securities and Samsung Securities to smaller-sized firms including Eugene Investment, eBest Investment and IBK Investment.

The local carbon emissions trading market, where entities can trade credits to offset their carbon dioxide emissions, opened in January 2015. Once the government sets the total amount of carbon emissions, companies purchase or trade emissions credits.

So far, only 650 registered businesses have acquired government qualification to participate in the market, as well as five market makers ― the Korea Development Bank, Industrial Bank of Korea, Korea Investment, SK Securities and Hana Financial Investment.

The addition of the 20 brokerages is expected to facilitate appropriate pricing of the carbon emissions.

“The participation by the securities firms will induce reasonable prices for carbon emissions, contributing to the government's carbon neutral strategy,” an official from the KRX explained.

The newly qualified brokerages can trade carbon emissions only as prop trading, and each can own up to 200,000 tons of emissions credits. Trading on commission by clients will be gradually allowed, but not at the moment. The carbon emissions market will operate for two hours from 10 a.m. to noon.

The value of the local carbon emissions trading market has continued to increase over the past few years, from 1.6 billion won ($1.3 million) in 2018 to 2.5 billion won in 2020. Yet it is not yet fully matured due to the poor level of the annual trading volume. The emissions credit price is around 30,000 won per ton, up from 8,000 won in 2015.

The KRX expects the ample liquidity supply from the new participants will stimulate the stagnant market and help the emissions price to settle at an appropriate level.