Efficiency versus Equality: Comparing Design Options for Indirect Emissions Accounting in the Korean Emissions Trading Scheme

Inha Oh,Jeong-Dong Lee,Yeongjun Yeo

doi:10.3390/su71114982

Inha Oh, Jeong-Dong Lee + Show 1 more

Open Access

https://doi.org/10.3390/su71114982

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Journal: Sustainability	Publication Date: Nov 11, 2015
Citations: 40	License type: CC BY 4.0

Affiliation: Konkuk University, Seoul National University

Abstract

The Korean emissions trading scheme (ETS) has one special characteristic that makes it different from other schemes, such as the EU ETS. While the other schemes consider only direct emissions from fossil fuels, the Korean ETS also regulates indirect emissions arising from the consumption of electricity. The problem of double counting arises under this setting, in which emissions from the power sector can be accounted for twice, when electricity is produced and consumed. This study aims to compare design options on indirect emissions accounting for the Korean ETS using a computable general equilibrium model. Four scenarios are generated for options accounting for direct and/or indirect emissions and are evaluated in terms of efficiency and equality. The result shows that the ETS operates most efficiently when only direct emissions are considered. However, the option that includes both direct and indirect emissions produces a competent result in terms of equality by spreading the economic burden of emissions reduction among industries. We conclude that this option can be an alternative to meet the key purposes of the Korean ETS.

Highlights

In 2011, Korea (South Korea) was the seventh biggest country emitter of greenhouse gases (GHG), emitting 697.7 Mt of carbon dioxide equivalent (CO2e)
This study aims to analyze and compare design options on indirect emissions accounting for the Korean emissions trading scheme (ETS) using a computable general equilibrium (CGE) model
There is a minor difference when comparing the level of GDP losses between the direct emissions (DIR) and indirect emissions with double counting of allowances (IND-DC) scenarios (DIR: −0.62% vs. IND-DC: −0.71%)

Summary

Introduction

In 2011, Korea (South Korea) was the seventh biggest country emitter of greenhouse gases (GHG), emitting 697.7 Mt of carbon dioxide equivalent (CO2e). The current design of the Korean ETS has some special characteristics compared to most existing ETSs. In particular, the Korean ETS regulates indirect emissions from the consumption of electricity, whereas the EU ETS considers only direct emissions. The Korean ETS regulates indirect emissions from the consumption of electricity, whereas the EU ETS considers only direct emissions This structural difference of the Korean ETS can lead to double counting in emissions accounting since the activities of generating and consuming electricity require the simultaneous use of emissions allowances [2,4,5,6]. The Korean government has pushed accounting for indirect emissions for the following reasons: (1) reducing the electricity intensity of the economy; (2) transferring the carbon price to the consumption side; and (3) spreading the burden of emissions abatement across industrial sectors

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Results

Conclusion