South Korea has announced its plans to pass a law this year to help start carbon dioxide emissions trading by 2015, a plan opposed by manufacturers who say it will increase costs and make exports less competitive globally.


Mr Park Chun Kyoo director general of the Presidential Committee on Green Growth overseeing climate change policy said that the National Assembly is expected to pass by December a bill for the proposed emission trading scheme or ETS.


Ms Victoria Cuming, senior analyst at Bloomberg New Energy Finance in London said that "Prospects for the bill appear quite healthy as it has backing from the ruling and opposition parties."


South Korea will become the third in Asia Pacific to tax polluters after Australia and New Zealand. South Korea has pledged a 30% reduction in emissions from expected levels by 2020 and offered tax breaks to companies including POSCO and Samsung Electronics Co to pollute less and use renewable energy.


Mr Park said that South Korea is taking a step by step approach to implement the ETS. He added that "We hope to give a clear signal to companies that our binding commitments will continue."


Australia plans to impose a price on emissions from next July before shifting to a cap and trade system three years later. New Zealand already has an emissions trading program in place.


The Korea Chamber of Commerce & Industry, which counts steelmaker POSCO and Samsung Electronics among its 120,000 members, and Federation of Korean Industries have asked the government to delay implementing the plan on concern that higher costs will result in loss of market share to rivals from countries that don’t either tax or cap emissions.


According to data from state owned Korea Energy Management Corporation, which is tasked with emissions reduction and promoting renewable energy, companies may face an additional KRW 5.6 trillion of costs if ETS is implemented.


According to the Korea Economic Research Institute, major industries including steel and petrochemicals stand to lose about KRW 12 trillion of sales.


South Korea, the world's ninth largest greenhouse gas emitter, announced its voluntary goal to reduce green house gas emissions blamed for global warming at Copenhagen in December 2009. The following year the government introduced a plan to set targets for the biggest polluters.


The government is in talks with 471 polluters ranging from factories, buildings and livestock farms that produce at least 25,000 tonnes of carbon dioxide a year to impose reduction targets by the end of September. These emitters generate about 60% of the country’s overall greenhouse gas emissions.


Mr Park said that "We will continue our binding commitments domestically to meet our pledges to the world." He added that South Korea's emissions may fall after peaking in 2014 if the nation pursues its reduction target by 2020.


He said that the government has been providing tax and financial incentives to encourage companies to cut their emissions, including feed in tariff since 2002. It is spending KRW 1 trillion in 2011 on renewable energy, including the KRW 395 billion for feed in tariffs or preferential payments, to solar, wind and other renewable energy projects.


The tariffs will be replaced with a 2% renewable portfolio standard or RPS, starting 2012. The country's 14 power generators and other energy producers would be required to derive a fixed quota of their energy output from renewable sources, including solar and wind.