The Latest Progress of Emissions Trading Schemes in Japan, China and the Republic of Korea

Executive Summary:
The purpose of this issue brief is to provide an overview of the latest movement of the emissions trading scheme (ETS), with a focus on the three key Asian carbon markets in Tokyo, China (esp. the pilots) and the Republic of Korea (hereinafter abbreviated as Korea). The key findings are as follows:
- As of 2017, the global share of emissions covered by carbon pricing policies, including ETS, in Japan, China and Korea accounts for 1.85%, 2.62% and 0.84%, respectively. If China is able to launch its national ETS successfully by the end of 2017, thereby scaling up from the pilot schemes, then the share of emissions covered by ETS globally would increase to 22% due to China’s contribution.
Tokyo ETS: Remarkable reductions achieved
- All the targeted facilities, consisting of around 1,300 offices and branches, have achieved their required reduction targets (between 6% and 8% depending on the sector), and over 90% of them have reduced emissions beyond their initial targets during the first compliance period between fiscal year of 2010 and 2014.
- 9% of the targeted facilities (124) have traded a total of 0.19 Mt-CO2 credits to meet their obligations, and 60% of the traded credits between the facilities belonging to the same corporate groups were free of charge.
China Pilot ETSs: Smooth operation of six pilot markets
- By the end of 2016, seven pilots have completed their compliance performance review for the companies that are required to achieve CO2 reduction targets. Almost all the companies in six pilots have fulfilled their obligations. Among these pilots, the best performer was Shanghai pilot ETS with all the targeted companies having achieved their reduction targets, while the worst performer was Chongqing pilot ETS, with only 70% of the companies under the pilot having met their targets in 2014.
- The market size has been growing at an impressive pace between 2013 and 2016. The annually overall trading volume has reached 344 Mt-CO2, and the volume of trading at the futures market was 257 Mt-CO2, accounting for 75% of the total trading volume in 2016.