UPDATE 2-Reuters Summit-S.Korea's CO2 trade bill receives bipartisan backing

Wed Jun 15, 2011 4:08am EDT

Related Topics

* For other news from Reuters Global Energy and Climate Summit, click on: here

* Bill likely to be approved "by late Autumn" -presidential committee chairman

* S.Korea should hike power prices to curb excessive demand

* Carbon tax needed to reduce carbon emissions (Adds more details and quotes)

By Ju-min Park and Cho Mee-young

SEOUL, June 15 (Reuters) - South Korea's ruling and opposition parties have agreed to approve an emissions trade bill in a upcoming parliamentary review, which is expected later this year, the chairman of the Presidential Committee on Green Growth said on Wednesday.

Soogil Young also told the Reuters Energy and Climate Summit that South Korea should implement a carbon tax and raise power prices as current prices drive excessive demand.

After strong opposition from industry, the government in April finalised the draft of the carbon emissions trading scheme bill by increasing free carbon allowances and softening penalty rules for non-compliance. The government wants the bill passed before September to start the scheme from 2015.

Green growth is a central policy of the administration of South Korean President Lee Myung-bak as Asia's fourth-largest economy aims to reduce greenhouse gas emissions voluntarily by 30 percent by 2020 from projected levels.

"Both the ruling and opposition parties have agreed (to approve the bill). By late Autumn, the bill is expected to be approved in the parliament ... there was a bipartisan agreement," Young said.

"If the parliament review is delayed to next year, no progress will be made due to April's general election. We aim to get the approval this year." If passed by legislators, it could become the region's second cap-and-trade scheme after New Zealand's.

Emissions from South Korea's economy doubled between 1990 and 2007, and are slightly larger than Australia's nearly 600 million tonnes. On a per-capita basis, they are on a par with some European nations. The data for 2007 are the latest available.

"Since the beginning of 2000, the country's emission growth rate has slowed down as its energy consumption growth was smaller than the economic growth, although last year was an exception with a severe cold spell and hot summer," Young said.

Separate from the emission trading scheme, South Korea is scheduled to start what it calls a greenhouse gas and energy target management system, covering about 47 0 firms or operations across all sectors emitting more than 25,000 tonnes of CO2 per year. In total, these produce 60 percent of South Korea's emissions.

Among these firms, the government would choose which should adopt the emission trading scheme later.

Under this separate mandatory scheme, firms will be given emission reduction targets by September this year and they must submit their reduction plans by December.

Annual checks are made to see if the firms meet their targets and, if not, they pay a penalty.

CARBON TAX, POWER PRICE HIKE

On top of the emission trading scheme, Young said South Korea should implement a carbon emission tax to cut pollution, while also raising power prices. He said present power rates were being charged at below cost, driving inefficient consumption.

"To reduce emissions, economic incentives should be provided ... such as raising power prices and implementing a carbon tax. The committee will focus to work to introduce a carbon tax," Young said. He noted the government would unveil gradual power price raise plans in July.

Young said the committee is ultimately aiming for flexible power pricing to help users optimise consumption.

"Without such power pricing vision, companies would not have business confidence in smart grids," he said, referring to the smart grid system where computers and sensors install ed at power plants, substations and along power lines signal control centres that better manage the flow of electricity.

South Korea said in early 2010 that it aimed for spending of 27.5 trillion won ($25 .4 billion) over the next two decades on smart grids to make electricity distribution more efficient, reduce emissions and save $26 billion in energy imports .

South Korea's economy minister Choi Joong-kyung told the Energy and Climate Summit on Tuesday the plan is to slowly increase electricity tariffs to slow power demand growth, despite the risk of adding to inflationary pressures. ID:nL3E7HE0OJ]

South Korea, heavily dependent on energy imports, should raise electricity prices at least 15 percent this year to reflect higher fuel costs and reduce demand, the head of the influential Korea Energy Economics Institute said last month. ($1 = 1,081.250 Korean Won) (Editing by David Fogarty)

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