1. Reason for revision

Since the Act on the Allocation and Trading of Greenhouse Gas Emission Permits has been revised (on February 6, 2024), the proposed amendment to its Enforcement Decree aims to improve certain deficiencies revealed in the operation of the current systems, including provisions for strengthening the guidelines on revoking previously allocated carbon gas emission credits. It also provides detailed criteria for participants in the voluntary emission credits trading system; detailed causes of or reasons for any additional allocation or revocation of emission credits; detailed criteria for the registration, deregistration, and items of compliance for emission credit trading brokerage firms; the procedure for approving the organization of greenhouse gas verification associations; and detailed criteria for the imposition of fines, etc., which have been delegated by the Act to its subordinate statutes.

2. Main contents

a. Companies that may voluntarily participate in the allocation of emission credits (Article 9 (4) of the draft).

The revision specifies the criteria for entities that may voluntarily participate in the allocation of emission credits as provided under the Act on the Allocation and Trading of Greenhouse Gas Emission Permits.

b. Additional Allocation of Emission Credits (Article 27 and Article 28 of the draft).

It provides the basis for the additional allocation of emission credits when the amount of emission credits increases based on the result of a dispute litigation or settlement.

c. Revocation of Allocated Emission Credits (Article 29 (3), Article 29 (4), and Article 29 (5) of the draft).

1) It proposes provisions for enhancing voluntary compliance with the regulations by differentiating the amounts of allocation credits to be revoked by emission reduction intervals.

2) It provides a basis for revoking the emission credits allocated to a company when the allocated amount has decreased due to a recalculation based on the outcome of dispute litigation.

d. Increase of Participants in the Emissions Trading Market (Article 31 of the draft)

To revitalize the emission credits trading market, expand the scope of the market participants to include collective investment companies, banks, insurance companies, and fund management entities among others.

e. Brokerage of emission credits (Article 31-2 of the draft).

To ensure stable operation of the emission credits market, certain market participants will be required to trade emission credits through an emissions brokerage company.

f. Registration of emission credits trading accounts (Article 32 of the draft).

When an emission credits brokerage company applies for registration of a trading account, it is required to distinguish the purposes of its transactions. When the emission credits brokerage company registers the emission credits acquired for the entrusting party in the emission credits trading register, the entrusting party is deemed to have registered the trading account.

g. Declaration of emission credits trading (Article 33 of the draft).

When the emission credits exchange notifies the head of the GHG Information Center of the details of a transaction or when an emission credits brokerage company registers the details of the entrusting party's emission credits trading in the trading account, the trader on the exchange or the entrusting party is deemed to have declared the details of such emission credits trading. 

h. Duties and Supervision of the Emission Credits Exchange (Article 34 and Article 35 of the draft).

It adds the tasks to be performed by emission credits exchanges, and also specifies the guidelines and standards for administrative dispositions, such as revocation of their designation and suspension of their services; prohibits leakages of trading secrets by officers, employees and others; and specifies the items to be complied with, such as the prevention of conflicts of interest by permanent officers and employees.

i. Registration, deregistration and compliance of emission credits brokerage companies (Article 36, etc. of the draft).

1) It stipulates the facilities with which an emission trading brokerage company must be equipped.

2) It stipulates the detailed requirements for administrative dispositions delegated by the Act, such as those related to suspension of the services/deregistration of emission credits brokerage companies, and the procedures for disposing of emission credits held by deregistered credit brokerage companies.

3) It specifies detailed standards and provisions for compliance by emission credits brokerage firms as provided under the Act (obligation of good faith, establishment of internal control standards for managing conflicts of interest, notification of the particulars of market participants, prohibition of unsound service practices, compensation of loss, and prohibition of profit guarantees).

j. Supervision of market participants (Article 36-13 of the draft)

It provides that the Minister of Environment may conduct inspections of market participants with the assistance of the Financial Supervisory Service in order to operate a fair and transparent emission credits trading system.

k. Designation and revocation of designation of emissions market makers (Article 37-2 of the draft)

It provides detailed criteria for the designation and revocation of designation of emission credit market makers and the procedures for disposing of emission credits by market makers whose designation has been revoked.

l. Criteria for market stabilization measures (Article 38 of the draft)

It aims to improve criteria by enabling a more rapid response to excessive declines in emission credit prices by modifying the requirements for market stabilization measures.

m. Extension of the deadline or validity period for reporting, submission, rollover, borrowing, or offset of credits (Article 39-2 and Article 44 of the draft).

It extends the deadline for reporting changes to the statement of emission volume particulars to 30 days, and also extends the deadline or validity period for submission, request for carryover, borrowing, and offset credits to 8 months from the end of the relevant year.

n. Founding and major services of the GHG Verification Association (Article 41-2, Article 41-3 of the draft)

It stipulates the documentation requirements for the founding of a statutory trade association for GHG verification and also specifies the tasks to be performed by that association, including surveying, research and education on the verification of GHG emission and reduction volumes.

o. Delegation or entrustment of authority over tasks (Article 57 of the draft).

1) It stipulates the delegation or entrustment of tasks related to the registration of emission credits trading accounts of market participants to the head of the GHG Information Center.

2) It stipulates the entrustment of tasks related to the registration, deregistration, management, and supervision of emission credits brokerage companies, the conformity assessment processing system, and support activities under Article 35 (1) 7 of the Act to the Korea Environment Agency.

3) It provides the basis for entrusting the GHG Verification Association with the tasks related to continuing or refresher education among the training courses stipulated in the business standards for verification reviewers.

p. Criteria for imposing penalties (Article 58 of the draft).

It provides detailed standards for imposing fines delegated by the Act.

q. Administrative disposition criteria for verification entities (Appendix 4 of the draft).

It provides for administrative dispositions differentiated depending on the severity of the offense (violation of suspension or correction orders).

r. Administrative disposition criteria for verification entities (Appendix 7 of the draft).

It provides for administrative dispositions differentiated depending on the severity of the offense (violation of service standards or disqualification).