Analysis on the Economic Effect of the International Offset Allowance under the Korean Emission Trading Scheme

Abstract

This paper tries to observe the economic effect of international carbon offset permit in designing the Korean emission trading scheme. The Korean government plans to achieve the mid-term greenhouse-gas emission reduction target in year 2020 which is 30%reduction from the business-as-usual projection of greenhouse gas emissions, and the emission trading scheme is becoming the most important policy instrument to achieve the goal. However, in designing the detailed system, debates are going on for various topics. Setting the level of limitation on using the international carbon offset is also a very controversial issue with varying views from both sides of the industry sectors and civil societies. Using the static one-nation computable general equilibrium model, suited to quantify effects of policies on energy and environmental fields, this study analyzed economic effects of the level of the international offset permit for various scenarios. Applying various scenarios on the permit level, we could find quantitative economic effects and efficiency thresholds for offset permit levels.