Korea’s 1st Carbon Fund Fails to Get Single Investment

Korea’s first carbon fund was launched six months ago, but has found no investment destinations over that period.

Korea Energy Management Corp. and asset management sources said yesterday that the fund worth 120 billion won has made no investment yet. The fund was created with the participation of the energy company, the Government Employee Pension Service, POSCO and SK Energy.

The dominance of foreign funds in profitable projects is the main reason for the carbon fund’s inactivity.

A project for nitrous oxide reduction in the town of Onsan near Ulsan, known as having a high return on investment, is managed by a French firm, while an Ulsan hydrofluorocarbon project is under a Japanese company. The carbon credit from the two projects is 10.5 million tons, more than 70 percent of the country’s combined carbon credit of 14.5 million tons.

Against this backdrop, worry is rising that Korea might have lost an opportunity for a promising business because it was excluded from emission reduction obligations in 2005, when the Kyoto Treaty took effect. The government might also be not preparing enough for possible designation as a country obligated to reduce greenhouse gas emissions in 2013.

The global carbon market reached 60 billion U.S. dollars last year and is expected to grow to 150 billion dollars in 2010.

Lee Myung-gyun, a professor at Keimyung University in Seoul, said, “In carbon funds, Korea lags behind by more than four years compared to other countries. The country should quickly invest in overseas markets, including Southeast Asia.”

jmpark@donga.com