South Korea has lifted a cap on coal-fired power generation amid LNG supply disruptions, the ruling Democratic Party said following the second meeting of the Middle East Crisis Economic Response Task Force on Monday.
"Effective today, the 80% cap [on coal] will be removed," said Ahn Do-geol, a member of parliament from the party, who also serves as the task force's secretary.
The party also announced an increase in the utilization rate of nuclear power plants from the high 60% range to 80%. Nuclear energy accounted for 31.7% of the country's total electricity production in 2024, according to the International Atomic Energy Agency.
The policy shift underscores tensions between short-term supply needs and South Korea's decarbonization commitments. At COP30 last November, South Korea joined the Powering Past Coal Alliance to accelerate coal retirement and reduce reliance on unabated coal generation. The country pledged to retire 40 of its 61 coal plants by 2040 while conducting feasibility reviews on the remaining 21 by 2026.
The Korea Emission Trading Scheme or K-ETS, which covers companies emitting over 125,000 metric tons of carbon dioxide equivalent or facilities emitting more than 25,000 mtCO2e, could now face potential emission increases from the higher coal dispatch.
Market sources said that the cap's relaxation could slightly tighten the outlook for Korean Allowance Units or KAUs if coal use rises and compliance demand strengthens.
KAUs represent emission allowances allocated to companies under the K-ETS, with each unit equivalent to 1 mt of CO2 equivalent.
"(We are) recalculating the possible emissions, but I guess we can estimate a little increase," a South Korea-based market source said.
OPIS last assessed KAU25 at KRW15,625 ($10.43)/mt on Thursday, down KRW 875/mt on day but up KRW250/mt on week.
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--Reporting by Sang Ah Lee, slee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com
(END) Dow Jones Newswires
March 20, 2026 03:08 ET (07:08 GMT)
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