Abstract
This study examines the effects of renewable energy expansion policy on the Korean economy and industries using the computable general equilibrium model, which divides the power generation sector into detailed generation technologies and sources. The scenarios are set to observe the cases where the share of solar photovoltaic and wind power generation reaches 7%. The effects are examined according to differing circumstances, such as when greenhouse gas (GHG) emissions are regulated, and the funding source for renewable expansion varies. The results show that renewable expansion policies have negative effects on GDP. However, the magnitude of the GDP decline becomes smaller when GHG emissions are regulated. The expansion of renewable energy induces the growth of upstream industries which supply components for renewable generation modules. Regarding employment, the renewable expansion policy can increase the demand for labor. However, the direction and the extent of the effect vary depending on the funding source. When overlapping regulations, such as the emission trading scheme and renewable energy expansion policies, exist in the power generation sector, the renewable energy expansion policy could provide incentives for GHG emission-intensive power sources.
Highlights
The Republic of Korea ( “Korea”) must urgently take steps to reduce its greenhouse gas (GHG) emissions to cope with climate change
The direction and the extent of the effect vary depending on the funding source
This section first describes the results of simulating the scenario wherein renewable energy is expanded when there is no regulation on GHG emissions
Summary
The Republic of Korea ( “Korea”) must urgently take steps to reduce its greenhouse gas (GHG) emissions to cope with climate change. This study examines the effects of increased renewable energy power generation on the Korean economy using the computable general equilibrium (CGE) model. It is possible to observe the effects of policies regarding the specific renewable generation technologies (e.g., the expansion of solar PV power) on the economy as well as on each industrial sector. Various scenarios were created according to the funding source for policy implementation (a lump-sum tax, labor tax increase, electricity price increase, and reduced subsidy for coal power generation). Employment increased as solar PV and wind power generation increased, but these effects were temporary and were largely offset by the decrease in employment induced by the increased tax burden and electricity price. It is generally accepted that the increase in the share of renewable energy generation will have a positive effect on the environment (in terms of GHG emissions reduction).
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