Abstract
Korea inaugurated an emission trading scheme (ETS) in 2015 for its ambitious target to reduce 37% greenhouse gas per 2030 business-as-usual level. This study examines the sustainable governance of the Korean petrochemical industry, one of the world’s major emitters of greenhouse gas, with 55 firms participating in ETS. On the basis of the non-radial, non-parametric directional distance function, this study derives three types of efficiencies: greenhouse gas technical efficiency (GTE), pure technical efficiency, and scale efficiency. Using these indices, this study also provides information for benchmarking for the fast followers. The findings of this study reveal the following. First, petrochemical industry exhibits 63.5% ETS performance, on average, showing huge potential improvement. Second, by decomposing GTE value, this study provides information from the perspective of scale to find out the oversupply issues in some petrochemical firms. Lastly, benchmark information for each firm is provided to enhance its efficiency.
Highlights
In 1995, the historic conference of the United Nations Framework Convention on Climate Change inaugurated its first Conference of Parties (COP) meeting to find the best sustainable development methods worldwide
GHG data can be used as the proxy variable of CO2 because carbon holds 80% of GHG emissions worldwide, which is similar in Korea according to the UNFCCC
Korea is one of the world’s largest emitting countries, and by the 2030s, government must reduce the emission by 37% from business as usual (BAU)
Summary
In 1995, the historic conference of the United Nations Framework Convention on Climate Change (hereafter, UNFCCC) inaugurated its first Conference of Parties (COP) meeting to find the best sustainable development methods worldwide. The agreement stipulated to continue efforts to limit the temperature increase to 1.5 ◦C above the pre-industrial level. These agreements recognized that the accumulated efforts to control the temperature control will significantly reduce the risks and effects of climate change. In 2009, the Korean government had set its own goals to reduce greenhouse gas (hereafter GHG) emissions by 30% from the business as usual (BAU) level by 2020. This plan was revised since the 21st session of the COP meeting held in Paris in 2015 (Paris agreement). As shown in Figure 1., in this treaty, Korea suggested a more long-term, yet a little loosened, responsibility to reduce 37% of GHG emissions from the BAU level until 2030
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