Price Update (2023.07.24)

Carbon allowance prices in Korea crashed to unprecedented new lows of ₩7,020 as of today, July 24. This is the first in the history of the KETS that KAUs have traded at this level. The KAU was at ₩8,640 when the system was introduced in January 2015. Spontaneous trading started above ₩11,000 and had been on the rise reaching ₩40,000 until multiple issues were encountered in mid-2020.

Since late April until early June, ₩12,000 has acted as both the support and resistance levels, but third-party players can no longer hold this level. By mid-July, prices have reached the historical and psychological support line of of ₩10,000 and as it collapsed, price decline accelerated - losing nearly 30% of the value within eight trading days.

The KETS is equipped with a market stabilization measures, in which the government can set an intervention measures when trigger prices are met. However, this is not mandatory and is implemented following the authority's discretion, so when the lower limit trigger was met in late May, no measures were operated. As prices continued to decline, the price trigger remained valid, but the inaction from the government left the market more anxious and confused.

Market participants are complaining that current allowance prices does not support any price discovery and discourage decarbonization measures and low-carbon investments. Many market participants are now questioning the market's function and how the 40% NDC target will be met.

The government is scheduled to release the Phase 4 basic plan incl. allocation quota by the end of this year.