Mixed Greens: S Korea set to introduce world’s highest carbon price

South Korea is paving the way for the introduction of a carbon price potentially as high as $90 a tonne for many of the country’s key industries, according to a new report by Bloomberg New Energy Finance (BNEF) and Ernst & Young. The report, released on Tuesday,  hails the proposed emissions trading scheme as the world’s most ambitious, but warns that changes to the proposals may be required to avoid “punitive” costs on industry.

“If the government implements the scheme without any changes, it will have major implications for Korean companies,” said Richard Chatterton, lead analyst for carbon markets at BNEF, in a statement. “A carbon price will lead to higher power prices and impose additional costs on industrial firms. The government is mitigating the impact for covered entities by handing out most allowances for free, but costs could still rise quickly.”

The report says the predicted price of $90/tCO2 reflects a combination of factors: ambitious reduction targets, the relatively high cost of reducing emissions within the country, and restrictions on the use of offset credits from abroad. It points to the linked Europe-Australia ETS as one of the two other carbon markets that will be in existence in 2015 when the Korean program starts – the other being the ETS linking California and Quebec. And while the Aus-EU ETS price is not expected to recover substantially until closer to 2020, BNEF says the California-Quebec market may trade around $50/tCO2 by 2020.

In other news…

America’s second-largest solar company, Solar City, has posted a first-quarter loss, a result the San Mateo-based company has attributed to higher costs from an increase in installation of rooftop solar systems at little or no charge to customers. Bloomberg reports that the $31 million loss – or 41 cents a share – compares with an income of $2.76 million, or 4 cents, a year earlier. The company says that sales rose 21 per cent to $30 million, and it invested $138.2 million to install solar systems, up 65 per cent, as demand for rooftop panels from homeowners and businesses surged. SolarCity is boosting spending now to build projects that will deliver long-term revenue, the company said in its second earnings report since its December IPO.