South Korea has approved a partial amendment to the Enforcement Decree of its Emission Trading Scheme Act, introducing a Market Stability Reserve or MSR mechanism under Phase 4 of its Emission Allocation Plan, according to a news release by the Ministry of Climate, Energy and Environment on Tuesday.

The revised rules are set to take effect on Wednesday.

The MSR is intended to curb price volatility in the domestic carbon market by adjusting auction supply when permit prices or volumes move outside preset thresholds. The ministry said detailed price bands and operating rules will be finalized by August after further deliberation and stakeholder consultation.

The amendment also creates a legal basis for removing allocated entities from K-ETS during the planning period if their prior-year emissions fall below 3,000 metric tons of carbon dioxide equivalent due to plant closures, asset sales or similar reasons. Previously, companies that downsized remained subject to reporting and monitoring obligations throughout the five-year planning period, adding to compliance costs.

The European Union's ETS similarly uses an MSR to reduce oversupply and smooth price swings. On April 1, the European Commission announced plans to end the automatic cancellation of EU allowances held in the MSR above 400 million, allowing the reserve to accumulate a larger volume of permits.

The South Korean market is holding a wait-and-see stance ahead of clearer MSR rules.

"The market still does not think much about the MSR impact since there are still no definite regulations. Participants are usually very reactive to news once clarity has been given, so the government is giving hints or leads instead," a market source said.

OPIS last assessed the Korean Allowance Unit or KAU25 at KRW 16,700/mt ($11.35/mt) on Friday, up KRW 200/mt from Tuesday when the MSR news was announced.

KAUs represent emission allowances allocated to companies under the K-ETS, with each unit equivalent to 1 mt of CO2 equivalent.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

--Reporting by Sang Ah Lee, slee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com

(END) Dow Jones Newswires

April 27, 2026 02:38 ET (06:38 GMT)

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