Korea has implemented an emissions trading scheme since 2015 to effectively achieve national greenhouse gas reduction targets. The operation during which the first and second plans have been in place over the past six years was to establish the emissions trading scheme, but from the third planning period that is set to begin next year, the country will be required to achieve substantive and full-fledged reduction.  

Meanwhile, power generation and integrated energy industries account for around half of the total emissions generated by companies subject to the emissions trading scheme.  However, it has been pointed out that the electricity market does not operate towards reducing greenhouse gas emissions even if emissions trading prices rise, because emissions trading costs are not reflected when the power production priority is determined in the electricity market, and thus the emissions trading scheme does not provide any effect. 

To address this issue, the government provided a plan to additionally reflect greenhouse gas emissions trading costs when determining the electricity supply priority, in the 8th Master Plan for Power Supply announced in December 2017. In December 2019, the Korea Power Exchange also revised its electricity market operating rules to reflect emissions trading costs in the entire process of the electricity market, such as determining the priority of electricity supply and calculating market prices and adjusted amount, but the current electricity market still determines the priority of electricity supply based on fuel costs as the sub-regulations which are the detailed operating regulations on the cost assessment, set specific time frames for implementation. 

Therefore, the Amendment aims to specify this matter in the Electric Utility Act that sets out the principles of the electricity market to clarify the priority determined in the electricity market.  In addition, where greenhouse gas-related control becomes tightened by means such as a rise in the emissions trading prices in reflection of the emissions trading costs when determining the priority of electricity supply for the electricity market, the emissions trading scheme and the electricity market shall operate to promote power generation and integrated energy industries to generate low-carbon emissions and reduce greenhouse gas emissions (Article 45 (3) newly inserted). 

Methods of Operating Electric Power System (Article 45)