New Briefing:

South Korea's Emissions Trading Scheme Weakened by Pressure from Major Industries

• The steel sector, including POSCO, and the Korea Chamber of Commerce and Industry (KCCI), have consistently engaged behind the scenes to weaken the Korea Emissions Trading Scheme (K-ETS) since 2010, while publicly supporting South Korea’s 2050 Carbon Neutrality Target.
• The persistently low carbon prices for which they advocated have reduced the overall effectiveness of the scheme and have been maintained via generous free allocations to highly engaged high-emitting sectors.
• Ongoing resistance from industry to strengthening the K-ETS—including calls for lenient offset rules and carryover limits—risks derailing South Korea’s Paris Agreement goals and discouraging green innovation and investment.

New analysis from InfluenceMap has revealed that major corporate actors, particularly the steel industry and large cross-sector industry associations, appear to have played a leading role in weakening the Korea Emissions Trading Scheme over the past 15 years—posing serious risks to the nation’s climate commitments and green transition. The analysis covers 234 instances of corporate climate policy engagement over this time, undertaken by 25 companies and 11 industry associations in South Korea. It highlights the outsized role of heavy-emitting sectors—led by the steel sector, represented by POSCO, and cross-sector industry associations such as the Korea Chamber of Commerce and Industr (KCCI)—in shaping the K-ETS policy in ways that reduce its ambition and effectiveness.

The report uses InfluenceMap’s evidence-based methodology, which benchmarks corporate influence against government’s policy ambition and Intergovernmental Panel on Climate Change (IPCC) pathways to 1.5°C. It shows that cross-sector industry associations account for 36% of all engagement on the K-ETS, followed by the steel sector (20%), chemical sector (11%), and energy (oil & gas) sector (8%). These four actively engaged sectors comprise over 75% of the engagement with the K-ETS, while other sectors have shown only marginal engagement. Additionally, the more actively a sector engaged with the K-ETS policy, the more negatively it engaged, advocating for measures such as increased free emission allowances, exclusions of indirect emissions, looser offset rules, and eased carryover limits.

Highly engaged entities have framed the K-ETS as a burden on industry and stressed the need to protect competitiveness in trade-exposed sectors. These positions run counter to strengthening the carbon price and undermine the scheme’s core objectives: reducing emissions cost effectively, driving innovation, and positioning South Korea as a climate leader.

For instance, KCCI, the entity most actively engaged on the K-ETS, did not support the K-ETS in its current form and advocated for an incentive-based system rather than a regulation-focused approach at a September 2024 National Assembly policy seminar on the 4th plan period of the K-ETS. At a Public Hearing on the Amendment to the Third Allowance Plan hosted by the Ministry of Environment in September 2023, POSCO called for the “elimination of carryover limitations” in the Fourth Allocation Phase.

Since its launch in 2015, the K-ETS has undergone three Allocation Phases. InfluenceMap’s findings show that sustained industry pressure has likely contributed to weakened policy outcomes:

• The overall emissions cap and the average annual free pre-allocation of allowances has been raised by nearly 10% from the First Phase to the Third Phase, undermining the effectiveness, efficiency, and fairness of the K-ETS.
• Free allowances remain widespread, particularly for heavy-emitting sectors such as steel, cement, and basic chemical manufacturing. However, the IPCC 6th Annual Report (p.628) states that “emissions reduction could be increased with higher carbon prices and without free allocation of allowances.”
• Carbon prices have stayed below the levels needed to drive meaningful decarbonization, and it remains uncertain whether the current policy framework will enable them to rise sufficiently by 2030. In 2025, the carbon price in the K-ETS is USD 6–7 per ton of CO₂. In contrast, the IPCC 6th Annual Report (p.463) suggests carbon price levels of at least USD 40–80 per ton of CO₂ by 2020, USD 50–100 by 2030, and USD 733 in 2050 to align with the Paris Agreement.

The K-ETS remains South Korea’s flagship climate policy instrument and is expected to undergo further revisions ahead of the country’s updated Nationally Determined Contribution (NDC), to be presented at the COP30 climate summit in Brazil. However, persistent opposition—particularly from industrial incumbents—poses a significant risk to achieving South Korea’s Paris Agreement targets. This opposition also undercuts economic opportunities in sectors that stand to benefit from a strong carbon price, such as electric vehicles, renewable energy, and battery storage. A weakened K-ETS reduces incentives for innovation and investment in the country’s green economy.

While these four sectors account for over 75% of K-ETS policy engagement, others—including automakers, information technology, and telecommunications—have been largely absent from the conversation. As the Fourth Allocation Phase approaches, companies in technology, retail, business services, and finance are expected to take a more active role. This includes amplifying their perspectives within industry associations such as the Korea Chamber of Commerce and Industry (KCCI) and the Federation of Korean Industries (FKI), which have so far shown limited support for a science-aligned K-ETS.

Chart 1. Corporate and industry influence on the K-ETS

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For further information or to arrange interviews, please contact:

Kitty Hatchley, Media Manager, InfluenceMap (London)

Email: kitty.hatchley {@} influencemap.org

Sejin Lee, Korea Program Manager, InfluenceMap (Seoul)

Email: sejin.lee {@} influencemap.org