Greenhouse Gas Emission Trading Market Opens... Banks and Insurance Companies Also Eligible to Participate

The Ministry of Environment has expanded the participants in the greenhouse gas emissions trading market to include financial institutions. It also revised the regulations on the cancellation of emissions allowances, which had been criticized as unfair profits for companies.

On the 3rd, the Ministry of Environment announced that it would publicly notify the amendment to the Enforcement Decree of the "Act on the Allocation and Trading of Greenhouse Gas Emission Allowances" (hereinafter referred to as the Emissions Trading Act) for 40 days starting the following day. This amendment was prepared to specify the details in accordance with the Emissions Trading Act, which will take effect on February 7 next year.

The scope of participants in the emissions allowance market has been expanded to include collective investment managers (asset management companies), banks, insurance companies, and fund managers. Previously, only companies allocated allowances, market makers, and emissions trading brokerage firms could participate in the market. Plans are in place to establish a foundation for individuals to participate in the emissions allowance market in the future. The Ministry of Environment expects that expanding market participants will open up the market and activate emissions allowance trading.

Measures to improve convenience and eradicate unfair practices were also included. For emissions trading brokerage firms, to enhance the convenience of transactions for market participants, they are now allowed to handle emissions allowance trading, reporting, and account registration on behalf of participants. Additionally, to prevent unfair practices, a regulation was established allowing the Minister of Environment, with the cooperation of the Financial Supervisory Service, to inspect the transaction operations and financial status of market participants.

The regulations on the cancellation of emissions allowances have been strengthened. Under the current law, the government could only cancel allowances if a company's emissions fell below a certain level (50% of the allocated amount). As a result, companies could gain unfair profits by selling allowances when their emissions decreased without making reduction efforts. Therefore, the threshold for allowance cancellation has been raised to 15%.