Issue Recalibrating carbon pricing to reconcile climate action with industrial competitiveness

Summary

The report calls for a finer reform of Korea's carbon pricing system so that climate action and industrial competitiveness can move together. It wants a policy mix that eases the rising cost burden on industry from a stronger emissions trading scheme while raising incentives to invest in abatement. A complementary package would include reinvesting auction revenues in R&D and equipment conversion, temporary relief for power-intensive industries and a review of refunding carbon border costs for exporters. A carbon tax would be considered for sectors such as buildings and transport that the trading scheme struggles to cover, forming a comprehensive carbon price system. Carbon contracts for difference would reduce uncertainty for investment in innovative abatement technologies.