How international credits dilute the effectiveness of the Korean Emissions Trading Scheme

The report argues that the Korean Emissions Trading Scheme (K-ETS) is undermined by a reliance on low-quality international carbon credits, which lead to over-crediting and depressed carbon prices. Using the EU ETS as a benchmark, the authors demonstrate how the EU phased out international credits to prioritize domestic reductions. A specific analysis of cookstove projects eligible for K-ETS finds they likely overestimate emission reductions by a factor of 18.3. The report also highlights systemic issues with hydropower and gas leak reduction projects, including lack of additionality and environmental harm. It recommends that South Korea ban international credits from the K-ETS, strengthen emission caps, and avoid using unreliable bilateral cooperation projects under Article 6.2 of the Paris Agreement to meet its 2030 Nationally Determined Contribution (NDC).

• The Korean Emissions Trading Scheme (K-ETS) covers 73% of South Korea's emissions and is central to its goal of reducing greenhouse gas emissions by 40% from 2018 levels by 2030, yet it is hindered by low allowance prices and reliance on international credits.
• Analysis of cookstove projects eligible for the K-ETS reveals a massive overestimation of emission reductions, with credits issued being 18.3 times higher than the actual climate impact.
• The primary drivers of over-crediting in cookstove projects are the use of biased methods to determine the fraction of non-renewable biomass (fNRB) and stacking rates, followed by usage, fuel consumption, and adoption rates.
• Hydropower projects used in the K-ETS often fail the test of additionality, as they are typically driven by government planning rather than the financial incentive of carbon credits.
• Avoided gas leakage projects are prone to overestimating baseline emissions by assuming leaks remain unrepaired for up to seven years, creating a risk of issuing 'junk credits'.
• The EU ETS provides a precedent for improving environmental integrity by excluding international credits by 2021 to focus on domestic decarbonization and prevent the depression of carbon prices.
• The EU's Carbon Border Adjustment Mechanism (CBAM) is designed to prevent carbon leakage and does not accept international offsetting credits as allowances.
• The current South Korean government has delayed lowering the K-ETS cap and reduced it using reserves rather than cancelling free allowances, which has not contributed to actual greenhouse gas reductions.
• South Korea's plan to use 37.5 million tonnes of international credits via Article 6.2 bilateral cooperation is criticized for potentially using projects with negligible climate impact, such as REDD+.
• The report recommends that the South Korean government ban international credits from the K-ETS or establish a transparent, independent expert committee to verify and potentially discount existing certified credits.

APA

Haya, B. K., & Gill-Wiehl, A. (2025). How international credits dilute the effectiveness of the Korean Emissions Trading Scheme. Carbon Market Watch. https://carbonmarketwatch.org/wp-content/uploads/2025/04/Plan-1.5-Recipe-for-Greenwashing.pdf

Chicago

Haya, Barbara K, and Annelise Gill-Wiehl. How international credits dilute the effectiveness of the Korean Emissions Trading Scheme. Carbon Market Watch, 2025. https://carbonmarketwatch.org/wp-content/uploads/2025/04/Plan-1.5-Recipe-for-Greenwashing.pdf.

Wikipedia

{{cite report |last1=Haya |first1=Barbara K |last2=Gill-Wiehl |first2=Annelise |title=How international credits dilute the effectiveness of the Korean Emissions Trading Scheme |publisher=Carbon Market Watch |date=April 2025 |url=https://carbonmarketwatch.org/wp-content/uploads/2025/04/Plan-1.5-Recipe-for-Greenwashing.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{haya2025how, author = {Haya, Barbara K and Gill-Wiehl, Annelise}, title = {{How international credits dilute the effectiveness of the Korean Emissions Trading Scheme}}, institution = {Carbon Market Watch}, year = {2025}, month = apr, url = {https://carbonmarketwatch.org/wp-content/uploads/2025/04/Plan-1.5-Recipe-for-Greenwashing.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }