South Korea’s carbon landscape is undergoing notable shifts in 2026, as tighter compliance rules push allowance prices higher while authorities prepare the groundwork for a marine-based carbon trading framework.
Carbon allowances traded on the Korea Exchange have reached their highest level in three years, driven by structural adjustments under Phase IV of the country’s emissions trading system (K-ETS).
Korea Allowance Units (KAUs) recently climbed 2.2% to KRW 13,750 ($9.53) per tonne of CO2 equivalent — their strongest performance since April 2023. Prices have risen by nearly one-third since the beginning of the year, reflecting expectations of tighter supply under the 2026–2030 compliance cycle.
The new phase introduces a reduced emissions cap of 2.54 billion tCO2e, 12% lower than in the previous period. It also incorporates a Market Stability Reserve mechanism intended to withdraw surplus permits in periods of price weakness. Together, these measures are reshaping the supply-demand balance in the domestic market.
Compliance obligations are also evolving. Power sector entities will progressively increase their reliance on auctioned permits, reaching 50% by 2030, compared to 10% today. Meanwhile, the non-power sector’s paid share will rise to 15%, further reinforcing market-based price formation.
Auction results are underscoring this tightening environment. February’s sale cleared at KRW 12,700/tCO2e—a 19% month-on-month increase—after attracting 2.3 million bids for just 1.2 million allowances. Another 1.2 million tonnes are set to be offered in March, with officials signalling flexibility to hold additional auctions if demand remains elevated.
Beyond the compliance market, South Korea is laying the foundation for blue carbon trading linked to coastal ecosystem restoration. Under the Fourth Basic Plan for Fisheries Resources Management (2026–2030), published by the Ministry of Oceans and Fisheries, pilot projects will be conducted between 2026 and 2028, with a full rollout targeted for 2030.
The initiative focuses on so-called sea forests—including kelp, seagrass and algae—with projects centred on seaweed transplantation and cultivation. Authorities plan to deploy AI, IoT, lidar and drone-based monitoring systems, alongside technologies to manage seaweed pests, in order to establish a credible measurement and verification framework.
Taken together, the tightening of the K-ETS cap and the planned introduction of marine-based credits signal a broader recalibration of South Korea’s carbon market architecture — one that combines stronger price signals in the compliance system with new asset classes aligned with ecosystem restoration.