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http://dx.doi.org/10.5370/KIEE.2015.64.5.667

A Study on the Impact Analysis of Introducing Emission Trading System on CBP Market and Policy Implications  

Kim, Myung-Soo (Dept. of Photovoltaic Engineering, FAR EAST Univerity)
Publication Information
The Transactions of The Korean Institute of Electrical Engineers / v.64, no.5, 2015 , pp. 667-679 More about this Journal
Abstract
The bearer of the power sector's ETS compliance cost is power consumer for the following reasons. Firstly, power companies are constrained in establishing appropriate strategies to comply with ETS regulations due to the structural differences between the domestic power market and emission trading system. In other words, because power companies do not have a right to determine price and production of electricity, they have to compete with other companies under disadvantaged conditions in the emission trading market. Secondly, because ETS compliance cost is part of power production costs as it is also clearly written in the national greenhouse gas reduction road-map and the second energy supply plan, the cost should be included in power price following the power market operation rule. Thirdly, the most effective method to reduce carbon emissions in power sector is to reduce power demand, which is efficiently achieved through raising power price to a realistic level. Low power price in Korea is the major cause of rising power demand which is also the major cause of rising GHG emission. Therefore, power sector's ETS compliance cost should be included in power price to encourage power consumers' actions on reducing power consumption. Fourthly, when externality cost occurs in the process of delivering public services, usually beneficiary pay principle is applied to identify the cost bearer. Since electricity is one representative public good, the bearer of power sector's ETS compliance cost is power consumer.
Keywords
ETS; BAU; GHG; CBP; SMP; PBP; RPS; REC; Windfall Profit; Offset Credit;
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