Challenges for low carbon policy and fiscal reform in Korea

Korea is a large CO₂-emitting country. Although Korea is not one of the countries with the commitment to limit CO₂ emission under the Kyoto protocol, the Korean government has voluntarily suggested 30 percent reduction from the 2020 BAU CO₂-emission level. A law, the Basic Act on Green Growth was introduced in February of 2009, and the Low Carbon, Green Growth Policy based on the law that aims at boosting the economy while coping with the growing concern about climate change issues was implemented. Among the policy instruments that the Korean government can choose from to achieve the goal, two quantity oriented policies, the Target Management System (TMS), and the Emission Trading Scheme (ETS) were selected. TMS was introduced in 2011 and is an interim policy toward ETS. ETS is supposed to replace TMS in 2015 and will function as the main policy instrument of inducing CO₂-emission reduction.