• Journal of Energy Engineering
• /
• v.24 no.1
• /
• pp.58-68
• /
• 2015

A marginal abatement cost analysis has been conducted to analyze the effects of abatement measures on greenhouse gas (GHG) emissions for the Korean residential sector. A bottom-up model using MESSAGE has been developed by defining the energy demand and constructing the reference energy system for the residential sector. A great amount of activity data has also been analyzed. Abatement potentials and related costs of individual abatement measures are investigated. The result from the marginal abatement cost analysis may provide general guidelines and procedures for the establishment of GHG abatement polices.

• Journal of Energy Engineering
• /
• v.24 no.4
• /
• pp.146-158
• /
• 2015

A bottom-up approach has been conducted to estimate greenhouse gas (GHG) emission and to analyze the marginal abatement cost for the Korean horticulture energy sector. With the systematically derived activity and energy balance data, the BAUs have been estimated, along with the marginal abatement cost over the period 2010 through 2030. The result from the marginal abatement cost analysis may provide general guidelines and procedures for the establishment of GHG abatement polices.

• Environmental and Resource Economics Review
• /
• v.25 no.3
• /
• pp.403-419
• /
• 2016

Cap-and-trade policies that allow firms to trade emission allowances are designed to reduce emissions at least cost and are shown to be efficient when there is no uncertainty over emissions. This paper examines how uncertainty in emissions affects firms' decisions about permit purchase and abatement. The results show that whether firms abate more under uncertainty compared to a case with no uncertainty depends on the expected penalty cost and marginal abatement cost. If the expected marginal penalty cost is greater than the marginal abatement cost, the firm will choose to reduce emissions and abate more under uncertainty. When the expected marginal penalty is greater than the marginal cost of abatement, increases in uncertainty result in reduced emissions. This paper also examines whether the order of abatement and permit trading and the realization of uncertainty affect firms' decisions. The results show that total expected emissions are the same regardless of the order of moves.

• Environmental and Resource Economics Review
• /
• v.23 no.3
• /
• pp.453-472
• /
• 2014

Analyzing the effects of carbon emissions trading, which is scheduled to be introduced in Korea in 2015, requires an accurate assessment of $CO_2$ abatement costs by both industries and firms. Firms faced with regulatory constraints are unlikely to minimize their production costs due to rising production costs caused by allocative inefficiency of inputs. The use of a distance function would results in underestimation of $CO_2$ abatement costs, because it fails to capture the allocative distortion costs. Recognizing the disadvantage of the previous approach, first, this paper tests for allocative efficiency of input for the Korean steel industry over the period 1990-2010, then derives the marginal $CO_2$ abatement costs by applying a cost function approach. The hypothesis of allocative efficiency in inputs is rejected and the steel industry pays an annual average cost of 92,000 won in removing an additional ton of $CO_2$ over the sample period.

• Environmental and Resource Economics Review
• /
• v.10 no.4
• /
• pp.547-567
• /
• 2001

This paper analyzed what kind of institutional scheme for domestic policy instruments to reduce GHG emissions are desirable for Korea in complying with the international efforts to mitigate climate change, by focusing on independent abatement(equivalent to the imposition of carbon tax) and domestic emission trading. It also examined the economic and environmental implications of recycling the government revenue created from implementation of those policies. By utilizing a dynamic CGE model, this study shows that the economic cost under independent abatement is projected to be higher than that under emission trading. It is because under independent abatement scheme each emitter in economy must meet its emission target regardless of the abatement cost. On the other hand, emission trading allows emitters to reduce the marginal cost of abatement through trading of emission permits. In designing future domestic policies and measure to address the climate change problem in Korea, therefore, this study proposes the introduction of domestic emission trading scheme as the main domestic policy instrument for GHG emission abatement. In terms of double dividend, in addition, this study shows that both independent abatement and emission trading schemes under various assumption on the revenue recycling may not generate the double dividend in Korea.

• Korean Management Science Review
• /
• v.33 no.4
• /
• pp.17-31
• /
• 2016

Waste sector has been a target of abatement policies by the most governments, even though its greenhouse gas (GHG) emission is not so high, since it is related to almost of other sectors. This study propose new GHG calculation equations which resolves logical contradiction of IPCC GL (Intergovernmental Panel on Climate Change Guideline) equations by including waste-to-energy effects. According to two GHG calculation equations, GHG emission inventory and BAU by the year 2050 have been computed. And GHG abatement potential and marginal cost for the five abatement policies carefully selected from the previous researches have been calculated for the year 2020. The policy that makes solid fuel like RDF from flammable wastes and uses them as combustion fuel of electricity generations has been found to be the most efficient and effective one among five policies. The cumulative abatement amount when five policies not mutually exclusive are applied sequentially has been reckoned.

• Environmental and Resource Economics Review
• /
• v.22 no.3
• /
• pp.499-520
• /
• 2013

This study proposes an iterative approach to the estimation of the marginal abatement costs of undesirable outputs by computing the slope of the efficient production possibilities frontier on the basis of the efficient projection points generated by the directional output distance function approach due to Fare et al. (2005) based on duality theory. In case of the latter methodology, the estimated marginal abatement costs differ significantly depending on the choice of the directional output vector. In addition, depending on the curvature of the underlying PPF the efficient projection points may be located at a significant distance away from their actually observed counterparts. While it would be more logical to estimate marginal abatement costs as a PPF slope at a point corresponding to the actually observed emissions level, the methodology based on duality theory is likely to produce unstable results due to the problems associated with applying the theorem of implicit function differentiation. Since our methodology is not based on duality theory, our results are immune to both of these problems. We apply our methodology to a sample of Western European countries for the period of 1995-2011 to illustrate our approach.

• Environmental and Resource Economics Review
• /
• v.16 no.1
• /
• pp.171-197
• /
• 2007

In this paper we provide a methodology that permits test of feasibility of Porter hypothesis under limited data environment by utilizing two types of output distance function: Shephard distance function and directional distance function. The production technology supported by Porter hypothesis is embodied in the directional distance function. The average annual marginal abatement cost for $SO_2$ obtained by estimating the directional distance function is higher than the one obtained with the Shephard distance function by about 50 percent in the Korean electric power industry over the period 1970~1998. This result implies that feasibility of Porter hypothesis depends upon whether investment in production capital and process can bring more than a 50 percent increase in the average productivity.

• Environmental and Resource Economics Review
• /
• v.18 no.4
• /
• pp.745-766
• /
• 2009

It is not valid to measure the degree of market power based on the markup of price over marginal market cost in an industry for which the market price of some inputs is not available because those inputs are then excluded in estimating the dual total cost function. If the roles of those inputs are ignored, the markup of price over marginal market cost is likely to be positive in the perfectly competitive industry. In order to have accurate market power markups for the environmentally regulated Korean iron and steel industry, in which the market price of raw material and the price of abatement capital are hard to obtain, in this paper, a dual cost function is derived given the optimal quantities of raw material and abatement capital, and then estimated jointly with the supply relation. The annual average degree of market power for the industry is estimated to be 0.49 over the period 1982~2001. Ignoring environmental regulation would overstate the degree of market power by about 8 percent.

• Environmental and Resource Economics Review
• /
• v.27 no.3
• /
• pp.399-420
• /
• 2018

This study has attempted environmental economic analysis on the cost structure of offshore fisheries based on fishery management data published by the Fisheries Research Institute to examine the effect of the environmental policy on the fisheries for the effective implementation of the Paris Convention. Under the assumption that both fisheries and carbon dioxide are simultaneously produced, the cost structure of offshore fisheries were analyzed. Cost function in a translog form was estimated and SUR (Seemingly Unrelated Regression) model was used for the analysis. Here, $CO_2$ emission of offshore fishery was calculated by using National Federation of Fisheries Cooperatives' data on supply of tax exemption oil (2003~2016). The cost function estimation showed that there is a weak disposition between catches and $CO_2$ emissions during the sample period, and the marginal abatement cost (MAC) is estimated at 1,457 won per year. In addition, for the same period, when 1% of $CO_2$ per horsepower is to be reduced MAC increases by 2.2%, and when 1% of $CO_2$ per 1 ton of catch is to be reduced, MAC increases by 1.4%.