A comparative analysis of the EU and Korea Emission Trading Scheme: origins, design and trajectories

Climate change mitigation has led to the development of emission trading schemes (ETS), a market-based policy tool designed to cost-effectively limit greenhouse gas (GHG) emissions. ETS mechanisms cap total emissions while allowing firms flexibility in meeting reduction targets through allowance trading. The European Union Emissions Trading System (EU ETS) and the Korea Emissions Trading Scheme (K-ETS) are two prominent examples, each shaped by distinct political and economic contexts. While both share fundamental principles, they differ in design, sectoral coverage, pricing, and integration with broader climate policies. This comparative study assesses their evolution, effectiveness, and impact on emission reduction, industrial competitiveness, and the transition to low-carbon economies. The analysis highlights key lessons for policymakers, emphasizing best practices that balance climate goals, economic growth, and innovation. As nations strengthen commitments under agreements like the Paris Agreement, ETS will continue to evolve as a crucial tool in global climate policy.