A new report, ‘Recipe for Greenwashing’, commissioned by Korean NGO Plan 1.5 and co-authored by Carbon Market Watch and Director of the Berkeley Carbon Trading Project Barbara Haya, has revealed that the climate credentials of the Korean Emissions Trading Scheme (K-ETS) risk being significantly undermined by its inclusion of international carbon credits.

The report analyses a sample of 21 clean cookstove projects that have supplied South Korean companies with carbon credits for use under the K-ETS, finding that on average they are likely generating 18.3 times more credits than they should.

The analysis finds that the 9.7 million credits (representing 9.7 million tonnes of emissions reductions) likely have a climate impact of only approximately half a million tonnes of carbon dioxide equivalent (531,979 tCO2e), the equivalent of 18 times more credits than are justified.

Cookstove projects constitute the majority of international credits used by companies complying with the K-ETS. Companies under the K-ETS are entitled to match their emission reduction obligations with the purchase of international credits, as long as they exceed no more than 5% of the company’s compliance obligation. 

Break the mould

The analysis highlights that reliance on international credits undermines the effectiveness and credibility of the K-ETS. It mirrors the now-abandoned practice in the European Union Emissions Trading System (EU ETS), where such credits led to an inflation in supply, price crashes, and delayed domestic decarbonisation.

“The inclusion of international credits in the EU ETS crashed the European carbon market with credits lacking real climate benefits. This provides a hard-learned lesson to the world about allowing questionable international carbon credits in compliance carbon markets,” said Benja Faecks, policy expert on global carbon markets at Carbon Market Watch. “Yet, rather than learning from this, the K-ETS seems to be heading down the same path – only this time with even more hot air units undermining necessary emission reductions by large polluters in Korea.”

While the EU has banned international credits from its ETS since 2021, the Korean government appears to be taking the opposite approach. Alarmingly, the government is considering raising the limit from 5% of a company’s emissions threshold to 10% in the fourth period of the K-ETS (2026-2030). Doubling the share of an already problematic decision will likely have detrimental consequences for the environmental integrity of the policy.

The South Korean government also plans to use international credits to reach its United Nations climate target for 2030 by including 37.5 million international credits into its nationally determined contributions.

The projects analysed in the report use methodologies AMS-I.E and AMS-II.G to generate carbon credits. Generally, the number of credits a carbon credit project issues under these two methodologies is determined by a number of factors, including actual stove usage, drop-outs, fuel consumption patterns, and many more. 

Research, as well as a decision by  the Integrity Council for the Voluntary Carbon Market (ICVCM) in March, has determined that both methodologies lead to over-crediting because these methodologies rely on outdated assumptions that allow a high, and inflated, volume of credits to be generated. Both methodologies were rejected from attaining the ICVCM’s Core Carbon Principles label. 

The wrong path

The report calls on the South Korean government to ban international credits from use under the K-ETS, strengthen caps and focus on domestic emissions reductions.

“This isn’t only a matter of bad accounting. It’s about real tonnes of carbon that go unabated,” said Kyungrak Kwon from Plan 1.5. “With cookstoves projects, hydropower, and reduced gas leakage projects flooding the scheme, we are on course to break the dam of environmental integrity.”