‘Global high-reliability carbon market’ to be operated next year… Review of digital asset issuance

The government has decided to begin operating the global high-reliability carbon market (GVCM) starting next year.

Blockchain technology is applied to data management to ensure reliability and facilitate transactions. The issuance of credit in the form of digital assets is also being considered.

On the 12th, the government held a meeting of foreign economic relations ministers at the Seoul Government Complex, chaired by Deputy Prime Minister and Minister of Finance and Economy Lee Hyeong-il, and discussed the 'detailed GVCM promotion plan'.

GVCM is a market to promote global trading of carbon credits, whose reliability has been questioned due to the lack of standardized standards for national greenhouse gas reduction.

After signing a memorandum of understanding (MOU) with the United Nations Framework Convention on Climate Change (UNFCCC) and the Global Green Growth Institute (GGGI) in May last year, the government is pursuing a GVCM operation plan based on the GVCM roadmap prepared in December last year.

Market credit is divided into 'GVCM A', which has received authorization from the host country, and 'GVCM NA', which has not received authorization. This is to open the way for use in both regulated and voluntary markets.

The detailed name of GVCM will also be changed to cover both markets. Change 'V' from 'Voluntary' to 'Verified'. This is to break the perception that it can only be used in the voluntary market.

The government establishes governance in which developing countries with permission and approval rights participate in the implementation of greenhouse gas reduction projects and credit transfer.

The issuing body is composed of 'Board of Directors - Technical Supervision Committee - Secretariat', and developing countries are encouraged to participate in the GVCM Board of Directors.

The government seeks to ensure efficiency and stability by having the secretariat record key information such as business operators, business target countries, and unique IDs on the blockchain.

Initially, it will be issued in a general electronic way, but issuing credit in the form of digital assets will also be considered in the future.

In the first stage, the Korea Exchange (KRX), which has experience operating an emissions exchange, will build an exchange.

In the second stage, the parallel issuance of digital assets will be reviewed considering GVCM credit issuance and trading volume and the legislative status of the Framework Act on Digital Assets.

We will work with related ministries and GGGI to secure participating countries and discover GVCM projects in areas that can utilize Korean technology.

We will also discuss ways to convert carbon reductions from carbon reduction projects of the World Bank (WB) and Green Climate Fund (GCF) into GVCM credits.

The government is seeking to secure countries that wish to participate this year.

GVCM is promoted at the Asia Pacific Carbon Markets Roundtable (APCMR), a consultative body led by New Zealand that discusses ways to establish an international carbon market in the Asia-Pacific region, and at GGGW, the annual general meeting of GGGI.

We will hold a Climate Investment Forum event in December to promote GVCM to overseas carbon market officials and domestic stakeholders.

The government plans to form a GVCM issuing organization next year with countries that expressed their wish to participate at the 31st Conference of the Parties next month.

After discovering specific business areas this year, we will begin full-scale operation by specifying the business structure within next year.

A government official pointed out, "As the major parties to the Paris Agreement are expected to find it difficult to achieve the 2030 National Greenhouse Gas Reduction Target (NDC) through domestic reduction efforts alone, the need to revitalize the international carbon market continues to be raised."

He went on to explain, “However, questions are being raised about reliability as there are no standardized international carbon market standards,” and “We are pursuing the establishment of GVCM to improve reliability.”