Korea Trade Review (무역학회지)

Korea Trade Research Association (한국무역학회)
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The effect of international linkage of emissions trading markets on Korean industries

배출권거래제의 국제적 적용이 한국산업과 무역에 미치는 효과

  • Received : 2022.01.31
  • Accepted : 2022.02.26
  • Published : 2022.02.28
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Abstract

In this study, I focus on analyzing how the effects of implementing ETS are different depending on whether Korean ETS linking with carbon markets in other countries. The global computable general equilibrium (CGE) model built in this study analyzes the chages in the production and trade of industrial sectors according to the international linkage of ETS compared to the reference scenario of emissions reduction targets and implementation of ETS. From the analysis of internatioanl linkage of carbon markets scenarios, Annex B countries-South Korea carbon market linkage with individual ETS in China worse the economic outcomes in South Korea the most. This means South Korea lose the international competitiveness compared to China in this scenario. On the other hand, Annex B-China carbon market linkage with Korean individual ETS implementation reduce the decreases in production and trading. The most effective way is to join a global emissions trading market with China. The results are consistent in most industries of South Korea. These results are caused by that the supply of emission allowance is increased and the price of emissions allowances is dropped by China's participation to the carbon market, which can be understood to reduce the carbon reduction cost for industrial sectors. In addition, it can be also concluded that the determinant of the negative impact of ETS on changes in production and trade is more sensitive to the price of emissions allowances than to the characteristics of production and trade structure.

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References

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