GEC ENG

Compliance & Voluntary Carbon Market

	Compliance Carbon Market	Voluntary Carbon Market
Units Traded	Carbon Credits Emission Allowances	Carbon Offsets Voluntary Emission Reduction (VER) Credits
Regulation	Strict regulation by mandatory national, regional or international carbon reduction regime	No direct regulation from government Standards are defined by independent certification bodies
Buyers	Large emitters required to reduce emission by law	Any organization or individual who wants to offset their emission
Price	15 ~ 50 $ ( 270 BN $)	0.30 ~ 100+ $ ( 0.40 ~ 1 BN $)

CCM is the dominant player today, but VCM will grow rapidly in the future.

Although there is a tendency to use the term carbon credit for both compliance & voluntary carbon markets, but strictly speaking, the term carbon credit is used only in compliance market (where cap & trade regulations are strictly enforced by national authorities), while the term carbon offset is used in voluntary market.

AAU (Assigned Amount Unit) : Country-specific quotas for Kyoto Protocol-obligated countries.
EUA (EU Allowance) : Emission credit traded between individual participants of countries participating in EU-ETS, a European credit trading scheme
CER (Certified Emission Reduction) : Emission credit generated by clean development mechanism (CDM).
ERU (Emission Reduction Unit) : Emission credit generated by the Joint Implementation (JI).
CFI (Carbon Financial Investment) : §Emission credit traded on the US Chicago Climate Exchange (CCX).
NGAC (NSW Greenhouse Abatement Certificates) : Certified emission reduction traded on Australia Carbon Credit Exchange (ACX).
Offset : §Project reductions (credits) traded in CCX.

Compliance Carbon Market

Marketplaces where emitters can obtain and surrender emission permits or carbon credits in order to meet their legally binding goals on GHG emissions
Emission Trading System	Cap-and-Trade System Each country sets the total amount of CO2 emissions allowed (cap) and grants emission permits. Emission Allowance (credit) ← Permit of 1 ton CO2, provided by a national organization for free or by auction. Baseline-and-Credit System The country grants multiple 1 metric ton credit: Carbon Credit as an extra effort, CO2 emission can be reduced, and the remainder can be sold to others with insufficient allowances. It is called by other names: Certified Emission Reduction (CER), Emission Reduction Unit (ERU)
Clean Development Mechanism (CDM)
Joint Implementation (JI) - Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) -Land Use, Land Use Change and Forestry (LULUCF)*

*It applies not only to the aviation industry but also to many other fields. Applied standards: VCS, ACR, CAR

(In the greenhouse gas reduction mandatory market)

Certified emission reduction trading scheme and process (in Korea)

KAU21 (Korea Allowance Unit 2021)

Emission allowances allocated by the Korean government in 2021.
Companies that generate more than 125,000 tons annually are subject to credit.
It is fortunate if there is a surplus, but if there is not enough, you have to buy it and make up for the emission, so companies hate to become subject to credit.
'Certified emission reduction' are managed within each country and cannot be purchased from abroad.
Failure to secure credit can result in a triple penalty, resulting in 'certified emission reduction trading liabilities' that exceed operating income.
Some think this trading is unfair because the quotas for companies in each industry are kept secret (only known to the government).

Voluntary Carbon Market

Types of Carbon Offset Projects:

Renewable energy
Energy efficiency
Destruction of industrial pollutants
Agriculture, Carbon retirement
Links with emission trading schemes
Methane collection and combustion
Small-scale schemes
Land use, land-use change and forestry etc.

Carbon Offset Project Validation & Verification

Validation	Validation of a project documentation and site visit (done before or during project implementation) to make sure carbon offsetting standards (rules and requirements) are met and the methodologies are properly applied. Once validation has been concluded, the project proponent may submit the project for registration with the respective program.
Verification	The process of evaluating calculations of the actual amount of GHG emission that have been avoided or sequestered through implementation of the project. The last step before the issuance and sale of carbon credits.

Source: K. Bakal, Voluntary carbon market: Participants-who does what (UTube) + Documents from Verra

Korea's offset scheme (external project)

Laws related to the offset scheme

Meaning of ‘External Project’

Conditions for external projects

- Emission Credit allocation and trading law and enforcement ordinance (Credit Trading Act): June, 2020 revised
- External Project Feasibility Assessment and Reduction Certification Guidelines (External Project Guidelines): June, 2018 revised

Companies eligible for the Certified Emission Reduction Trading Scheme

* Refers to projects that reduce, absorb,

or remove greenhouse gas in a way that meets international standards in emission
facilities or activities outside organizational boundaries. (Including clean development system projects implemented in Korea)

* Refers to greenhouse gas emission companies belonging to sectors and industries subject to credit allocation as specified in the national credit allocation plan.

- The project must be voluntarily implemented outside the organizational boundaries of the allocation recipient.

- The carbon absorption performance must not be generated while fulfilling mandatory requirements.

- They must be projects with additional actions and measures beyond those that can be implemented under normal business conditions.

- Projects must be quantified and verified continuously.

- Projects must apply a methodology approved by the emission certification board.

- Projects must have started on or after April 14, 2010.

Emissions Trading Scheme Offset Scheme Promotion System	Overall Management	Ministry of Environment
	Sector	Industrial Development Sector	Waste Sector	Agriculture, Forestry, Livestock, Food Sector	Building, Transportation Sector
	Governing Bodies	Ministry Of Trade	Ministry of Environmentt	Ministry of Agriculture	Ministry of Land and Transportation
	Management Agency	Korea Energy Agency	Korea Environment Corporation(K-eco)	Korea Agriculture Technology Promotion Agency, Korea Forestry Promotion Institute (KOFPI)	Korea Energy Agency (building), Korea Transportation Safety Authority (transportation)

Korea's offset scheme (external project)

Professional Private Companies:

Ecoeye

Certified emission reduction trading company specializing in all phases of financial projects: issuance (credit generation through investment in reduction projects), brokerage, management, advisory, and investment.

Greenery

Multiple roles in the supply chain: consulting (project registration support), verification review (final registration of project appropriateness), monitoring, and third-party verification (crediting of reductions). Blockchain & token/NFT are also in mind.

App (Popple) launched: a platform for companies and individuals to register and purchase KOC (Korea Offset Credit).

CPE Cell

International CDM partner under UNFCCC, specialized in CDM & CERs management.

To overcome the problems of ICO, US Subsidiary Amet Actio realizes STO through the Federal Securities and Trading Commission (SEC).

Pursuing 'commercialization of blockchain-applied certified emission reduction trading platform’.

Plans to establish an internationally certified emission reduction trading cryptocurrency AI exchange.

	Compliance Carbon Market	Voluntary Carbon Market
Units Traded	Carbon Credits Emission Allowances	Carbon Offsets Voluntary Emission Reduction (VER) Credits
Regulation	Strict regulation by mandatory national, regional or international carbon reduction regime	No direct regulation from government Standards are defined by independent certification bodies
Buyers	Large emitters required to reduce emission by law	Any organization or individual who wants to offset their emission
Price	15 ~ 50 $ ( 270 BN $)	0.30~100+ $ (0.40 ~ 1BN $)

Marketplaces where emitters can obtain and surrender emission permits or carbon credits in order to meet their legally binding goals on GHG emissions
Emission Trading System	Cap-and-Trade System Each country sets the total amount of CO2 emissions allowed (cap) and grants emission permits. Emission Allowance (credit) ← Permit of 1 ton CO2, provided by a national organization for free or by auction. Baseline-and-Credit System The country grants multiple 1 metric ton credit: Carbon Credit as an extra effort, CO2 emission can be reduced, and the remainder can be sold to others with insufficient allowances. It is called by other names: Certified Emission Reduction (CER), Emission Reduction Unit (ERU)
Clean Development Mechanism (CDM)
Joint Implementation (JI) - Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) - Land Use, Land Use Change and Forestry (LULUCF)

Emis- sions Trading Scheme Offset Scheme Promo- tion System	Overall Manage-ment	Ministry of Environment
	Sector	Indust -rial Develop-ment Sector	Waste Sector	Agricult-ure, For-estry, Li-vestock, Food Sector	Build- ing, Trans- porta- tion Sector
	Govern- ing Bodies	Ministry Of Trade	Ministry of Environ-ment	Ministry of Agricult-ure	Ministry of Land and Trans- port- ation
	Manage-ment Agency	Korea Energy Agency	Korea Environ-ment Corpor-ation (K-eco)	Korea Agricult-ure Technol-ogy Pro- motion Agency, Korea Forestry Promo- tion Ins-titute (KOFPI)	Korea Energy Agency (build- ing), Korea Trans- porta- tion Safety Autho- rity (trans- port- ation)