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South Korea Carbon Trading Scheme Approved

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* National CO2 pricing scheme starts 2015

* Covers about 60 percent of nation's carbon pollution

* Industry worries about rising costs under scheme

By Meeyoung Cho

SEOUL, May 2 (Reuters) - South Korean lawmakers approved a national emissions trading scheme on Wednesday to tackle the country's growing greenhouse gas pollution, overcoming strong industry opposition and joining a growing number of nations to put a price on carbon.

Of the 151 lawmakers who voted, 148 approved the scheme, underscoring bipartisan support for a cap on carbon emissions, in stark contrast with the United States and Australia where emissions trading has been deeply divisive.

Analysts and officials say the programme won approval, despite fears it would hurt the economy, because of the long-term benefits to the country's huge conglomerates from being more energy-efficient and exporting greener goods.

The scheme has not generated the same bitter public debate as Australia and the United States, with the public more concerned with neighbouring North Korea.

"This is to develop green industry technologies and technology to reduce energy consumption, and develop those as one industry...ultimately we want to organise markets for green business ahead of other countries," said Yang Soogil, chairman of the Presidential Committee on Green Growth told Reuters.

The scheme caps carbon pollution right across the economy, from steel-makers, ship-builders to power generators, even large universities, encouraging them to become more energy efficient. South Korea is the world's fifth largest oil importer and the number two buyer of liquefied natural gas after Japan, so curbing energy imports would bring big savings.


The programme, due to start Jan 2015, opens the possibility of international collaborations as part of a global effort to curb the growth of carbon pollution that scientists blame for heating up the planet and triggering more chaotic weather.

To meet the mandatory cap, firms usually trade emissions permits or buy carbon offsets from overseas to manage their carbon liabilities.

Europe has the world's largest emissions trading programme, Australia's carbon pricing scheme will start in July, while New Zealand's is already operating. Last week, the Australian government said it was exploring carbon trading links with South Korea.

China has announced 7 pilot carbon market regions, though international links are unclear.


COST CONCERNS

Final details of South Korea's programme are still to be worked out but the latest draft says it would likely cover 60 percent of the country's greenhouse gas emissions. It focuses on industrial operations producing more than 25,000 tonnes of carbon dioxide (CO2) a year.

The nation's top industry body has fought against the scheme saying it would add unnecessary costs and that competitor Japan has yet to put a price on carbon.

The Federation of Korean Industries has said the scheme would cause additional initial costs of 4.7 trillion Korean won ($4.16 billion) even when 95 percent of pollution permits are given for free.

Each permit represents a tonne of carbon emissions, with free permits awarded during the scheme's two first phases, spanning 2015-2017 and 2018-2020. The rest would be auctioned.

The government says the scheme is crucial to reining in emissions from Asia's fourth largest economy, which have doubled since 1990. The government says the scheme is needed to meet a pledged goal of reducing emissions by 30 percent from projected levels by 2020.

"The opposition had no reason to oppose as they have been supporting the bill. Industry should be the one that's mostly worried about the outcome," Heo Seong-wook, Professor of Law from Seoul National University, told Reuters, referring to the country's powerful industrial conglomerates called chaebols.

Yet despite their political clout, objections from industry have not swayed lawmakers, Heo said, in part because of ongoing talks among political leaders to try to rein-in big corporates.

"The parties might be concerned that, if they actively support industry's opinion, they might be seen as not so friendly towards ordinary people," Heo said.

Many Korean firms, particularly big exporters remain unconvinced but have nonetheless been preparing, analysts say.

Top emitters include major employers such as POSCO , the world's No.3 steelmaker, and Samsung Electronics, the world's biggest electronics firm by revenue.

"The news of carbon emission trading would not come as an immediate shock to the steel industry as steel makers have prepared for the scheme," an analyst at Daishin Securities, Mun Jeoung-up, said.

Another analyst at Hanwha Securities, Kim Kang-o, said: "If the cost burden accounts for a certain percentage of operating profits, that is a problem...Whether the industry would pass on the cost to consumers is also an important factor." ($1 = 1,128 Korean won) (Reporting by Meeyoung Cho, Eunhye Shin and Eun Jee Park; editing by David Fogarty and Keiron Henderson)

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