Korean Market: High prices amidst supply problems (November 2017)


November’s latest market data shows a heavy demand, primarily from the power sector, for Korean carbon allowances as poor liquidity continues to drive the prices at record high levels. 

The price of carbon credits played at around KRW 20,000 – KRW 21,000 for 8 months but the lingering uncertainty over the forthcoming allocation plan for Phase II affected the market’s stability. In September, the spike was triggered when the government announced the delay of the Phase II allocation plan which should have been issued in June. During a series of public fora, the Ministry of Environment said that the reduction intensity would increase in the Phase II and this caused entities to secure their emissions, to avoid shortage, either by buying in large quantities or banking their permits rather than selling them to the market. This resulted to an imbalance in supply and demand and the surge in prices as entities rushing to secure permits are willing to pay higher amounts for the scarce volume being sold in the market...