In order to prevent human activities have been substantially increasing the atmospheric concentrations of greenhouse gases, UNFCCC and Paris Agreements were adopted in 1994 and 2015 respectively. Korea government announced nation GHG target 30% lower than BAU level by 2020, 37% lower than BAU le...
In order to prevent human activities have been substantially increasing the atmospheric concentrations of greenhouse gases, UNFCCC and Paris Agreements were adopted in 1994 and 2015 respectively. Korea government announced nation GHG target 30% lower than BAU level by 2020, 37% lower than BAU level by 2030. Government has implemented the GHG Emissions Trading Scheme(K-ETS) to achieve the national reduction targets since 2015. Phase 1(2015-2017) of the K-ETS is running for three years considering the early stage. The total number of allowances during Phase 1 is 1,686 million ton to the 522 entities. The purpose of this thesis is to analyze the carbon trading market in Korea and suggest the political implications to improve the market efficiency for policy maker. In order to analyze the carbon trading market, this study adopted three questions as following. The first, whether the trading market in Korea is a efficient market or not The second, what are the participants trading activities The third, what are the main price drivers in K-ETS To make an affirmation of the market efficiency, conducted the law of one price and causality test. I took a survey with the participants in K-ETS for investigation of trading activities. To identify the price drivers in K-ETS, conducted the regression analysis. The main results are as follows; In first, trading market of K-ETS is not efficient market according to the law of one price test. To improve the market efficiency, government needs to allow to participate with the third entities in the market. Secondly, negotiation trading method has to be imposed the restrictions by government which set up the minimum trading volume to reduce the portion of market share. Because negotiation trading undermined the representative nature of the price by competitive trading. Thirdly, in order to improve the market liquidity, it needs to implement the LP(Liquidity Provider). Fourthly, government needs to review the permissive ratio of the banking with considering the trading volume and the balance of demand and supply. Main problem of K-ETS is that participants used the banking and borrowing even though there is room for allowances in the first year. Fifthly, it needs to revise the calculation institution of the trading cost for generation company. It has the negative effects to decrease the efforts of mitigation actions in power company and reduce the market efficiency. In a long terms perspective, Cost Based Pool(CBP) has to be changed into Price Based Pool(PBP) system. Finally, K-ETS needs to introduce the derivative products to make cost discovery function better at an early stage. Price drivers which are energy price, temperature and weather, economic index do not work in K-ETS
In order to prevent human activities have been substantially increasing the atmospheric concentrations of greenhouse gases, UNFCCC and Paris Agreements were adopted in 1994 and 2015 respectively. Korea government announced nation GHG target 30% lower than BAU level by 2020, 37% lower than BAU level by 2030. Government has implemented the GHG Emissions Trading Scheme(K-ETS) to achieve the national reduction targets since 2015. Phase 1(2015-2017) of the K-ETS is running for three years considering the early stage. The total number of allowances during Phase 1 is 1,686 million ton to the 522 entities. The purpose of this thesis is to analyze the carbon trading market in Korea and suggest the political implications to improve the market efficiency for policy maker. In order to analyze the carbon trading market, this study adopted three questions as following. The first, whether the trading market in Korea is a efficient market or not The second, what are the participants trading activities The third, what are the main price drivers in K-ETS To make an affirmation of the market efficiency, conducted the law of one price and causality test. I took a survey with the participants in K-ETS for investigation of trading activities. To identify the price drivers in K-ETS, conducted the regression analysis. The main results are as follows; In first, trading market of K-ETS is not efficient market according to the law of one price test. To improve the market efficiency, government needs to allow to participate with the third entities in the market. Secondly, negotiation trading method has to be imposed the restrictions by government which set up the minimum trading volume to reduce the portion of market share. Because negotiation trading undermined the representative nature of the price by competitive trading. Thirdly, in order to improve the market liquidity, it needs to implement the LP(Liquidity Provider). Fourthly, government needs to review the permissive ratio of the banking with considering the trading volume and the balance of demand and supply. Main problem of K-ETS is that participants used the banking and borrowing even though there is room for allowances in the first year. Fifthly, it needs to revise the calculation institution of the trading cost for generation company. It has the negative effects to decrease the efforts of mitigation actions in power company and reduce the market efficiency. In a long terms perspective, Cost Based Pool(CBP) has to be changed into Price Based Pool(PBP) system. Finally, K-ETS needs to introduce the derivative products to make cost discovery function better at an early stage. Price drivers which are energy price, temperature and weather, economic index do not work in K-ETS
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