Seven years after it was agreed upon, the Kyoto Protocol on global climate change finally came into effect in February among 38 of the world's most industrialized countries, with the notable exception of the United States. Under the first phase of the Protocol, an amendment to the United Nations Framework Convention on Climate Change (UNFCCC), these countries (referred to as 'Annex 1' countries) are committed to reducing their emissions of greenhouse gases (GHGs) to 5.2 percent below 1990 levels during 4- year period from 2008 to 2012. Under the second phase of the Protocol, developing countries (Annex 2 countries) will be required to reduce greenhouse gas emissions between 2013 and 2017. As a signatory to the Protocol, Korea is obliged to begin reducing GHG emissions during this period. As the world's ninth-largest producer of carbon dioxide, a key greenhouse gas, there is considerable pressure upon Korea to make a significant contribution to the overall reduction in emissions. Despite the commitment of the government, the Hyundai Research Institute (HRI) predicted that Korea would be hard pressed to meet to its goals given the enormous costs involved and the nature of its existing infrastructure. The Korean government has set aside 21.5 trillion won to support projects that would help Korea meet its emission reduction goals. However, there is a strong need to rethink this basic strategy and take a broader approach to meeting the challenge of global warming. Recent pronouncements by our politicians suggest they look upon adherence to the second phase of the Protocol as a threat to the national industrial base that must be fended off or minimized. If this attitude persists, there will be neither a solution to the potential damage facing Korean industry, nor an effective national response to the grave environmental problems facing the planet. What is needed most is a change in mindset by the Korean government toward the environmental issue who should regard it not as an onerous burden but rather as an opportunity to restructure the Korean energy sector and environmental industry. As a means as to how this restructuring might take place, it is rewarding to take a look at the Kyoto Mechanism stipulated by the Kyoto Protocol. There are three means of emission reduction are detailed under the Kyoto Mechanism, namely, Clean Development Mechanisms, Joint Implementation, and Emission Trading. The Clean Development Mechanism (CDM) defined in Article 12 provides for Annex I parties, such as companies of Annex 1 countries to implement projects that reduce emissions in non-Annex I countries, in return for certified emission reductions (CERs). The CERs generated by such projects can be used by Annex I parties to help meet their emissions targets under the Kyoto Protocol. Joint Implementation (JI) provides for Annex 1 parties to implement emission-reducing projects in other Annex 1 parties, i.e., countries, to generate CERs. Emission Trading allows Annex 1 parties to purchase CERs from other Annex 1 parties and to help them meet their emission targets. What would be the best option for Korea that would avail the country the most favorable and effective reduction schedule To reduce greenhouse gases without eroding the competitiveness of industries that use carbon-intensive fuels, the government should take note of the European Union Emission Trading Scheme (EU ETS), the world's first, which came into operation on Jan. 1, 2005 and is scheduled to run until Dec. 31, 2007 under phase 1 of its operation. The system runs on a basic market mechanism of buying and selling, under which the amount of GHGs each participating industrial company can emit will be restricted. If it exceeds the limit, the company can buy emission credits from other firms who are producing emissions below their targets to avoid being penalized. Industries that are users of carbonintensive fuels, including refineries, steel, vehicle and cement plants must implement measures to minimize the impact of emissions restrictions on their business activities. Samsung Electronics said it has completed renovation of its domestic plants to reduce harmful by-products in the production process, and will follow suit with its foreign factories. LG Electronics is also eyeing long-term plans to cut gases, while Hyundai Motor said it would move to build eco-friendly cars and enhance fuel efficiency for its vehicles in line with international standards. Such initiatives are admirable, but might not the desire to reduce GHGs by Korean industry and restructure itself into the bargain across the board be given impetus through the introduction of a similar Emission Trading Scheme right here in Korea