An estimation of offset supply for the Korean emissions trading scheme using the Bass diffusion model

Abstract

The purpose of this paper is to estimate the possible carbon offset supply in the Korean emissions trading scheme using the Bass diffusion model. To estimate the quantity of the likely offset supply, both a bottom-up and top-down approach were used. The forecasted supply of offsets from 2015 to 2020, for non-covered companies in the industrial sectors, is approximately 12.60 million tCO2e. For a realistic estimation, scenario-based analysis on the marginal abatement costs for each project type and sector has been conducted. Five offset project scenarios (6,000; 12,000; 20,000; 33.000; and 100,000 Korean Won/tCO2e) have been selected. It is estimated that there will be 2.44~3.43 million tCO2e of offsets available until 2020. This analysis forecasts a significant shortage of domestic offsets in ETS periods if no additional offset programs or methodologies are allowed.