# South Korea: 772 companies under a 2,537 Mt cap for 2026–2030, with power auctioning rising to 50%

_Last checked 2026-11-12 · https://asiacarbondesk.com/korea-k-ets/_

Asia's longest-running national cap-and-trade scheme entered its fourth phase in 2026. The cap is 2,537.30 Mt for five years, 2,362.99 Mt was allocated in advance to 772 companies, and power companies must buy a share that rises from 15% in 2026 to 50% in 2030 at auction. An 85 Mt market stability reserve now sits inside the cap.

## Key facts

- Allocated in advance: 2,363 Mt (to 772 companies on 29 Dec 2025 · 59 power, 713 others)
- Phase 4 cap 2026–30: 2,537 Mt (about 510 Mt a year · Phase 3 averaged 610 Mt)
- Covered companies: 772 (10,538 sites · 684 companies in 2021)
- Power auction share: 15%→50% (2026 to 2030 · non-power 15%, trade-exposed 0%)
- Market stability reserve: 85 Mt (inside the cap; in law since 29 Apr 2026)
- Penalty: 3× (the year's average market price, per missing tonne)

## In brief

- Phase 4 (2026–2030) has a cap of 2,537.30 Mt on a linear path, and 2,362.99 Mt was allocated in advance to 772 companies on 29 December 2025: 795.75 Mt to 59 power companies and 1,567.24 Mt to 713 others.
- Power companies buy 15% of their allowances at auction in 2026, rising to 50% in 2030; most industry (95% of the sector) stays fully free, so the effective auction share is 11.0%, up from 4.0% in Phase 3.
- The ministry said on 20 August 2026 that the allowance price had risen from about KRW 10,000 on average in 2025 to the KRW 30,000 range. Since 29 April 2026 the 85 Mt stability reserve can be used to adjust auction supply when auction prices leave a pre-set range.
- Companies that fall short pay up to three times the year's average market price per tonne, and may cover part of their obligation with offset credits up to a legal ceiling of 10%.

## Cap per phase, annual average (MtCO2e a year)

| Period | MtCO2e/yr |
|---|---|
| Phase 3 (2021–25) | 610 |
| Phase 4 (2026–30) | 510 |

## Maximum share of allowances given free, by phase (%)

| Period | % |
|---|---|
| Phase 1 | 100 |
| Phase 2 | 97 |
| Phase 3+ (ceiling) | 90 |

## Share of allowances power companies must buy at auction (%)

| Period | % |
|---|---|
| 2026 | 15 |
| 2027 | 20 |
| 2028 | 30 |
| 2029 | 40 |
| 2030 | 50 |

## From the 2012 Act to Phase 4

| Date | Event |
|---|---|
| 2012-05-14 | The ETS Act is enacted. |
| 2014-01 | Korea Exchange is designated as the allowance exchange. |
| 2015-01-01 | Phase 1 starts, with all allowances allocated free. |
| 2018-01-01 | Phase 2 starts, with 97% of allowances free. |
| 2021-01-01 | Phase 3 starts: five years, 684 companies, 3.03 billion t cap. |
| 2024-01 | Act amended to allow brokered trading and financial-sector participants. |
| 2025-11-11 | Cabinet adopts the 2035 NDC and the Phase 4 allocation plan. |
| 2025-11-24 | Trading through securities brokers begins. |
| 2025-12-29 | 2,362.99 Mt of Phase 4 allowances allocated to 772 companies. |
| 2026-04-29 | Market stability reserve rules take effect. |
| 2030 | Power-sector auction share reaches 50%; Phase 4 ends. |

## How a compliance year works

| Step | What happens |
|---|---|
| Allocation | Allowances for the whole phase are allocated before it starts; free shares are released year by year (KAU26–30). |
| Buy or trade | Extra allowances come from monthly government auctions or KRX trading (10:00–12:00). |
| Report | Verified emissions report within 3 months after the year ends. |
| Surrender | Surrender allowances within 8 months after the year ends; offsets may cover part, up to the plan's limit (ceiling 10%). |
| Penalty | Any shortfall can be charged up to 3× the year's average market price per tonne. |

## Who is covered

| Item | Rule or figure |
|---|---|
| Threshold | Company ≥125,000 tCO2e a year (3-year average), or a site ≥25,000 tCO2e |
| Gases | Greenhouse gases under the Carbon Neutrality Act, excluding NF3 |
| Companies, Phase 4 | 772: 59 power, 713 non-power (industry, transport, buildings) |
| Sites, Phase 4 | 10,538 |
| Phase 4 cap | 2,537.30 Mt: 2.10 bn free, 0.26 bn auctioned, 89 Mt new-entrant reserve, 85 Mt stability reserve |
| Outside the cap | 20 Mt market-making reserve |
| Leaving mid-phase | Possible if prior-year emissions fall below 3,000 tCO2e |

## Offset credits (KOC/KCU) at a glance

| Item | Rule |
|---|---|
| Use limit | Up to 10% of the surrender obligation by law; the exact limit is set in each allocation plan |
| Project start | Projects started on or after 3 December 2016 |
| Validity | Offset credits not banked or surrendered lapse 8 months after the compliance year |
| Market makers | KDB, IBK and KEXIM by law, plus licensed securities firms |
| Who can trade | Covered companies, market makers, and since 24 Nov 2025 financial firms via brokers |

## All figures

| Item | Value | Source | Checked |
|---|---|---|---|
| ETS Act enacted | 14 May 2012 (Act No. 11419) | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Phase 1 period | 1 Jan 2015 – 31 Dec 2017 (3 years) | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Phase 2 period | 1 Jan 2018 – 31 Dec 2020 (3 years) | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Phase 3 and Phase 4 periods | Phase 3: 2021–2025; Phase 4: 2026–2030 (5-year periods) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Length of a compliance period (current law) | 5 years | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Exchange designated | January 2014 (Korea Exchange) | [Korea Exchange (KRX) ETS Market Information Platform](https://ets.krx.co.kr/contents/OPN/01/01050401/OPN01050401.jsp) | 2026-11-12 |
| Market opening | January 2015 | [Korea Exchange (KRX) ETS Market Information Platform](https://ets.krx.co.kr/contents/OPN/01/01050401/OPN01050401.jsp) | 2026-11-12 |
| Free allocation, Phase 1 | 100% of allowances allocated free | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률시행령) | 2026-11-12 |
| Free allocation, Phase 2 | 97% of allowances allocated free | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률시행령) | 2026-11-12 |
| Free allocation ceiling, Phase 3 onwards | at most 90%, set in each allocation plan; may not exceed the previous period's ratio | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률시행령) | 2026-11-12 |
| Coverage thresholds | Company average ≥125,000 tCO2e/yr over 3 years, or any site ≥25,000 tCO2e/yr | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Gases | Greenhouse gases under the Carbon Neutrality Act, excluding NF3 | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Phase 4 cap (2026–2030) | 2,537.30 MtCO2e, set on a linear reduction path | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Phase 3 cap (2021–2025) | 3.03 billion t (annual average 610 Mt) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Phase 4 cap, annual average | 510 Mt per year (2.54 billion t total) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Covered companies, Phase 3 | 684 (2021) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Covered companies, Phase 4 | 772 (2026) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Benchmark-method allocation: participation ratio against emissions, Phase 3 (not the share of national emissions) | 62% (participants' emissions basis) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Benchmark-method allocation: participation ratio against emissions, Phase 4 (not the share of national emissions) | 77% (benchmark-allocation row; 62% in Phase 3) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Phase 4 pre-allocation | 2,362.99 Mt to 772 companies, allocated 29 Dec 2025 | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156737066) | 2026-11-12 |
| Phase 4 power-sector allocation | 59 companies, 211 sites, 795.75 Mt | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156737066) | 2026-11-12 |
| Phase 4 non-power allocation | 713 companies, 10,327 sites, 1,567.24 Mt | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156737066) | 2026-11-12 |
| Covered sites, Phase 4 | 10,538 sites | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156737066) | 2026-11-12 |
| Phase 4 cap: free allocation | 2.10 billion t | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Phase 4 cap: auctioned allocation | 0.26 billion t | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Phase 4 new-entrant/expansion reserve | 89 Mt (inside the cap) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Phase 4 market stability reserve (K-MSR) | 85 Mt, placed inside the cap for the first time | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Phase 4 market-making reserve | 20 Mt, outside the cap | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Auction share, power sector, Phase 4 | 15% (2026), 20% (2027), 30% (2028), 40% (2029), 50% (2030) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156737066) | 2026-11-12 |
| Auction share, non-power sectors, Phase 4 | 15% for sectors not exempt (up from 10%); trade-exposed sectors 0% | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Trade-exposed industry kept at 100% free allocation | sectors covering 95% of industry (steel, petrochemicals, cement, semiconductors, etc.) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Effective auction share, Phase 3 | 4.0% | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Effective auction share, Phase 4 | 11.0% | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Power sector total auction share over the period | 29% in Phase 4 vs 10% in Phase 3 | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727612) | 2026-11-12 |
| Benchmark coefficient | top 37% (Phase 3) moving stepwise to top 20% (Phase 4) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| Phase 3 over-allocation clawback (power) | 25.2 Mt over-allocated; 23.95 Mt recovered from companies | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156737066) | 2026-11-12 |
| Emissions reporting deadline | within 3 months after the end of each compliance year | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Surrender deadline | within 8 months after the end of each compliance year | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Penalty surcharge for shortfall | up to 3× the average market price of that compliance year, per tonne | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Penalty base | 3× the year's exchange average price (total trade value ÷ total volume) | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률시행령) | 2026-11-12 |
| Offset credit (KOC/KCU) use limit, legal ceiling | up to 10% of a company's surrender obligation; exact limit set in the allocation plan | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률시행령) | 2026-11-12 |
| Offset project start date | projects started on or after 3 Dec 2016 (Paris Agreement entry into force in Korea) | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Offset credit validity | unsurrendered, unbanked offset credits lapse 8 months after the compliance year | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률시행령) | 2026-11-12 |
| Market makers | KDB, IBK and KEXIM by law, plus licensed securities firms by decree | [Korea Ministry of Government Legislation, National Law Information Center (law.go.kr)](https://www.law.go.kr/법령/온실가스배출권의할당및거래에관한법률) | 2026-11-12 |
| Brokered (consignment) trading start | 24 Nov 2025; banks, insurers, funds and pension funds can trade via brokers | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156730842) | 2026-11-12 |
| Trading hours | 10:00–12:00; auctions 14:00–15:00 (from 24 Nov 2025) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156730842) | 2026-11-12 |
| Brokerage legal basis | Act amended January 2024 | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156730842) | 2026-11-12 |
| K-MSR made law | Decree amendment approved 21 Apr 2026, effective 29 Apr 2026; price corridor details to be set by August 2026 | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156756850) | 2026-11-12 |
| K-MSR trigger | auction price outside a pre-set range (upper reserve-release price to lower auction-reserve price) | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156756850) | 2026-11-12 |
| Exit threshold during a period | a company may be removed if prior-year emissions fall below 3,000 tCO2e | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156756850) | 2026-11-12 |
| 2035 NDC | 53–61% below 2018 net emissions (742.3 Mt), adopted 11 Nov 2025 | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156727601) | 2026-11-12 |
| National GHG emissions 2025 (provisional) | 685.71 MtCO2e | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156782809) | 2026-11-12 |
| Government statement on price recovery | from about KRW 10,000 average last year to the KRW 30,000 range as of 20 Aug 2026 | [Ministry of Climate, Energy and Environment (MCEE), published on korea.kr](https://www.korea.kr/briefing/pressReleaseView.do?newsId=156782809) | 2026-11-12 |

## FAQ

**What has happened to the K-ETS allowance price?**

The ministry said on 20 August 2026 that the price had risen from about KRW 10,000 on average in 2025 to the KRW 30,000 range. It did not give a daily price. Shortfalls are charged at up to three times the year's average market price.

**How many companies are covered in Phase 4?**

772 companies with 10,538 sites: 59 in power and 713 in industry, transport and buildings. In 2021 there were 684.

**How big is the Phase 4 cap?**

2,537.30 Mt for 2026–2030, about 510 Mt a year, down from about 610 Mt a year in Phase 3. 2,362.99 Mt was allocated in advance.

**How much must companies buy at auction?**

Power companies: 15% in 2026, rising to 50% in 2030. Non-power sectors that are not trade-exposed: 15%. Trade-exposed industry, about 95% of the sector, stays fully free. The effective auction share is 11.0%.

**What happens if a company does not surrender enough allowances?**

It can be charged up to three times that year's average market price for each missing tonne. Allowances are due within 8 months of the year's end.

**Can companies use offset credits?**

Yes. The decree caps offsets at 10% of the surrender obligation, with the exact limit set in the allocation plan. Projects must have started on or after 3 December 2016.

**Is there a price stabilisation mechanism?**

Yes. An 85 Mt market stability reserve sits inside the Phase 4 cap. Since 29 April 2026 it can be used to adjust auction supply when auction prices leave a pre-set range.

**Can financial firms trade Korean allowances?**

Yes, since 24 November 2025, through a licensed broker. Banks, insurers, fund managers and pension funds are included.

## Not listed yet

- Phase 1 and Phase 2 caps and company counts: not found in the official texts we read.
- The exact Phase 4 offset limit: the law sets a 10% ceiling, but the plan's figure was not in the texts we read.
- The market stability reserve's price range: due by August 2026; no official notice found.
- The limit on banking allowances into the next phase: seen only in press reports.
- Phase 1 and Phase 2 caps and company counts — Not found in the official texts read (only Phase 3 and Phase 4 figures are in the 2025 allocation plan release).
- Current numeric offset (KOC/KCU) limit for Phase 4 — Decree sets a 10% ceiling and the MCEE says the limit was kept, but the number in the Phase 4 plan was not in the texts read.
- Banking limit (multiple of net sales) — Seen only in press reports; official plan text not opened.
- K-MSR price corridor values — To be finalised by August 2026 per MCEE; no official notice found.
- Number of designated market makers — Not stated in the official texts read.
- Full allocation plan document and GIR statistics (gir.go.kr, me.go.kr) — Not opened; korea.kr copies of MCEE releases used instead.