Weekly Update: Market Stabilization Measures Explained

KETS Market Stabilization Measures EXPLAINED

Just like other carbon markets, the Korea ETS has market measures in place to ensure market liquidity and provide a stable price formation. These measures are enshrined under the Emissions Trading Act and its related enforcement decrees. The KETS market stabilization measures are activated when threshold prices are met, and the authority—in this case, the Ministry of Environment—will activate the stability instruments when it deems necessary.


Due to the continuous price decline of the benchmark allowance unit, KAU22, prices have met the #3 trigger criteria from the above table (decline threshold of ₩12,088). The environment ministry announced the activation of the market stabilization measures on 2023 July 25. The detailed plan were as follows:

- Target Unit: KAU22

- Minimum Trading Price: ₩ 7,020 (lowest closing price in the recent 5 trading days, including the announcement day) 

No alt text provided for this image
KAU22 Closing Prices

- Start Date: July 26 (Wed)

- Implementation Period: until the last day of KAU22 trade (August 31)*

*However, if the criteria to lift the restriction is met for 5 consecutive trading days, the minimum price will end the following day.

 - Additional Measures: If price drops again below the lowest closing price (₩7,020) after the lifting of restrictions, the closing price on the day of the price decline will be set as the new floor price and restrictions will be applied again from the following day.


How is the termination of the stabilization measures calculated? 

Lifting the market stabilization restrictions requires the market to rise to a certain price threshold within the implementation period. The calculation is


No alt text provided for this image
Example of Lifting the MSM


Today (7/27), the closing price of KAU22 was ₩8,800, the second day of meeting the price criteria for the termination of the market stabilization measures. The minimum price setting will be lifted if the price exceeds ₩7,720 for 5 consecutive days. 

  - Re-application of the minimum trading price: If the closing price falls below the previous lowest price (₩7,020), measures will be re-activated.


No alt text provided for this image
Example of MSM Re-Activation