Linked Carbon Market in China, Japan, and Korea Good for Business
NEW YORK, May 17, 2018 — Companies operating in China, Japan, and South Korea can benefit from a linked carbon market between the three countries, according to a new report published by the Asia Society Policy Institute (ASPI) in collaboration with KPMG Samjong, the Korean member firm of KPMG.
The report, titled Business Sector Action to Drive Carbon Market Cooperation in Northeast Asia, acknowledges that such a market could create risk and operational challenges if its rules are unclear, but concludes that “opportunities for companies from a linked carbon market in Northeast Asia are greater than the drawbacks.”
According to the report, a linked emissions trading system would give companies, particularly multinationals operating in many countries, more options to manage their greenhouse gas (GHG) emissions and meet their emissions reduction targets. Greater market liquidity would reduce “risk through price stabilization,” and achieve “cost-efficient reductions by providing more mitigation options for offsetting GHG emissions.”
The report recommends three actions that private sector actors can take to help drive carbon market cooperation in Northeast Asia:
- Proactively identifying areas of regulation to minimize conflicts of interest and create co-benefits for the three countries;
- Developing business opportunities such as joint projects involving businesses across China, Japan, and Korea; and
- Requesting public financing for large-scale investment in low-carbon projects.
The authors also suggest that policymakers, should they start linkage discussions, engage the private sector early on, and consider a framework that provides economic opportunities for companies. Such a framework could “drive business growth and investment in low-carbon technologies.”
"In the dynamic economies of Northeast Asia, business sector actors must help governments craft effective carbon market mechanisms that encourage clean growth," Kevin Rudd, former prime minister of Australia and president of the ASPI, wrote in the report’s foreword. "Given the myriad ways these companies can affect and be affected by regional carbon market policies, deepening public-private engagement and consultation is essential."
The report is part of ASPI’sToward a Northeast Asia Carbon Market initiative, which has explored the challenges and opportunities of regional carbon market cooperation for the past three years.
About the Asia Society Policy Institute
With a solution-oriented mandate, the Asia Society Policy Institute tackles major policy challenges confronting the Asia-Pacific in security, prosperity, sustainability, and the development of common norms and values for the region. The Asia Society Policy Institute is a think-and-do tank designed to bring forth policy ideas that incorporate the best thinking from top experts in Asia and to work with policymakers to integrate these ideas and put them into practice. Its recent reports include Shifting Trade Winds: U.S. Bilateralism and Asia-Pacific Economic Integration and Preserving the Long Peace in Asia: The Institutional Building Blocks of Long-Term Regional Security.
About KPMG Samjong
KPMG Samjong is the Korean member firm of KPMG, a global network of professional services firms providing audit, tax, and advisory services. KPMG’s Climate Change and Sustainability practice helps organizations better understand policy, regulatory, and business environments related to climate change and sustainability issues. KPMG provides advice on climate finance and minimization of regulatory risks from carbon emissions and creates new business opportunities in the global carbon market.