The divergence of South Korea's Emissions Trading Scheme (ETS) from the EU ETS: An institutional complementarity view

Emissions trading schemes (ETS) have spread across the globe to tackle climate change. However, limited attention has been given to how ETS characteristics and designs differ and why. We use the concept of institutional complementarity to explore how the EU ETS and South Korea's ETS (K-ETS) adapt to complement established political economy. The EU ETS is characterized as a market with stakeholder ownership, while the K-ETS is more regulatory in nature with government leadership. The EU ETS complements a decentralized political system with liberalized energy market, and the K-ETS became compatible with the centralized majoritarian politics and a regulated electricity market. The ETSs have evolved incrementally, and they are not likely to link in the foreseeable future due to divergence. We suggest a strong focus on “how to adapt” an ETS to its own institution rather than adopting the established blueprint model in countries with a strong regulatory style of governance.