Hello, this is GLEC, a specialized company in carbon emission measurement for the logistics and transportation industry.
Today, I'm going to share something that every logistics company owner needs to know - and it might keep you up at night.
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The Uncomfortable Truth About Rising Carbon Costs
Picture this: A mid-sized logistics company CEO in Seoul hasn't been able to sleep properly for weeks. Why? Because starting in 2026, the EU will impose additional taxes on products with high carbon emissions, and domestic emission permit prices could skyrocket at any moment.
This isn't just speculation. Since the implementation of the paid allocation auction system in 2020, with the paid allocation ratio increased to 10%, the burden on logistics companies has been steadily increasing. And it's about to get much worse.
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Understanding K-ETS: It's No Longer Someone Else's Problem
Let me break down what K-ETS (Korean Emissions Trading System) means for your business.
If your company has:
- Annual greenhouse gas emissions averaging 125,000 tons or more over the past 3 years
- OR at least one facility emitting 25,000 tons or more
Then you're already directly subject to the emissions trading system.
But here's what most people don't realize: Even if you're not directly subject, you're affected through your supply chain. Multinational corporations are demanding greenhouse gas reduction targets from their suppliers. Companies with poor carbon management risk being excluded from major contracts.
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The Roller Coaster of Emission Permit Prices
The numbers tell a stark story. The average price of KAU (Korean Allowance Unit) dropped from 30,713 KRW per ton in 2020 to 23,023 KRW in 2021, but volatility has recently increased again.
Key government interventions that shook the market:
- Sudden carryover restrictions in May 2019
- Minimum price settings in April and June 2021
These interventions significantly affect permit prices and make business forecasting nearly impossible. It's like driving in thick fog - you can't see what's ahead.
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Real Numbers: The 600% Cost Increase Scenario
Let me show you the math with a real example of a medium-sized logistics company:
Current Situation:
- Annual greenhouse gas emissions: 50,000 tons
- Free allocation ratio: 90%
- Paid purchase requirement: 5,000 tons
- Current permit price: 25,000 KRW per ton
- Annual permit purchase cost: 125 million KRW
2030 Expected Scenario:
- Expected paid purchase volume: 15,000 tons (30%)
- Expected permit price: 50,000 KRW per ton
- Expected annual purchase cost: 750 million KRW
That's a 600% increase in logistics costs. This isn't a distant possibility - it's becoming reality.
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The Shipping Industry Is Already Feeling the Heat
From January 1, 2024, EU ETS coverage includes maritime transport. Ship operators of cargo and passenger vessels with a gross tonnage of 5,000 tons or more must report emissions and purchase allowances for each ton of CO2 generated.
Here's the shocking part: They must also purchase emission permits for 50% of voyages from EU to non-EU ports. The global impact is undeniable.
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Calculate Your Company's Impact in 3 Simple Steps
Step 1: Identify Current Emissions
- Diesel usage × 2.6 (emission factor) = CO2 emissions
- Example: 100,000 liters per month = 260 tons of CO2
Step 2: Predict Future Costs
- Direct emission permit purchase costs
- Carbon accounting costs per customer requirements
- Carbon management system implementation costs
Step 3: Risk Assessment
- ESG requirements from major clients
- Carbon management level compared to competitors
- Potential loss of new business opportunities
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The Consequences of Not Preparing Now
Global investment institutions and banks prioritize companies with strong ESG performance. I've seen real cases where:
- One logistics company lost a major corporate bid due to lack of carbon management systems
- Another company faced financing difficulties due to poor ESG ratings
The message is clear: Carbon management is no longer about environmental responsibility - it's about business survival.
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5 Actionable Solutions You Can Implement Today
The good news? It's not too late. Here's what you can do right now:
- Accurately measure current emissions
- Implement an emissions management system
- Establish reduction targets and roadmaps
- Build carbon accounting systems
- Strengthen supply chain cooperation
Remember: Greenhouse gas reduction projects require accurate MRV (Measurement, Reporting, Verification). Without proper MRV, no effort will be recognized.
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How GLEC Can Help Your Journey
The path to carbon neutrality in logistics is challenging, but you don't have to walk it alone. GLEC specializes in carbon management solutions specifically designed for the logistics and transportation industry.
In our next post, we'll dive deep into "Why MRV is Critical for Logistics Carbon Management and Why You Must Start Now."
Don't wait until it's too late. The time to act is now.
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For carbon emission consultations and inquiries, please visit the GLEC website.
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