Reasons for Proposal
The Act enforces an emissions trading system to achieve national greenhouse-gas reduction targets in an effective manner. However, it contains weaknesses in provisions concerning the allocation of emission permits, management of emission permits in reserve, designation of emissions permit market makers, and reporting and verification of greenhouse gas emissions and reductions, and this Amendment addresses and improves upon these weaknesses.
Details
A. Allow current business entities eligible for allocation to be designated as business entities eligible for allocation in the subsequent period instead of only allowing controlled entities under the target management system to be designated as business entities eligible for allocation, and prescribe grounds for revoking the designation of business entities eligible for allocation (Article 8).
B. Prescribe provisions concerning the succession of the rights and obligations of a business entity eligible for allocation in the event of a merger, split, relocation, etc., of the business entity (Article 8-2).
C. Strengthen the accountability of heavy greenhouse gas emitters by improving the criteria used for gratuitous allocation of emission permits, and prescribe provisions to allow fully gratuitous allocation for schools, hospitals, and other institutions of a public nature (Article 12).
D. Prescribe grounds to change the unit of emission permit allocation, additional allocation, and revocation of allocation from the current “facility” to “business establishment” to enable business entities eligible for allocation to promote internal reduction activities through inter-facility integration, etc. Simplify the documents required for allocation applications, prescribe grounds for the submission of emissions calculation protocols, and address ambiguities in the current provisions regarding additional allocation and revocation of allocation by prescribing separate, detailed provisions (Article 13, Article 16, and Article 17).
E. The current provisions stipulate a general description of the usage/purpose of emission permits in reserve, including allocation to new entrants and additional allocations in accordance with market stabilization measures, but actual reserves are utilized for different uses/purposes such as handling objections, additional allocations, and market making activities. Therefore, specify the uses/purposes of emission permits in reserve and prescribe grounds to allow the competent authority to hold separate reserves according to the usage/purpose (Article 18).
F. Unlike the stock market, the emission permit market has a restricted quantity of emission permits and trading peers, making it difficult to promote trading. Therefore, prescribe grounds to allow market making activities, such as designating a state-run bank, etc., as a market maker to trade emission permits in reserve, and prescribe measures to assess and correct such activities (Article 22-2).
G. Although the greenhouse gas emissions and reductions of business entities eligible for allocation are required to be verified by a third party in accordance with international standard to guarantee the accuracy and objectivity of the information, the Act lacks provisions concerning the designation and revocation of designation of verification agencies in charge of verification work, qualification and revocation of qualification of professional verifiers, etc. Therefore, prescribe the necessary provisions (Article 24-2, Article 24-3).
H. Prescribe provisions concerning penalty surcharges, fact-finding surveys, objections, and administrative fines in accordance with the amendment (Article 33, Article 37, Article 38, Article 43).
I. Ensure the stable formation of an emissions trading market and reduce the market impact of participation by third parties other than business entities eligible for allocation by prescribing that for at least 5 years, third party market participation shall be permitted only for financial institutions, securities firms, and other entities with such basic competencies (Addenda Article 3, paragraph 2).
