Abstract
This study’s aim is to examine the environmental performance of the South Korean manufacturing industry and suggest performance-oriented policies. The manufacturing industry is classified into seven sub-sectors based on individual sectoral differences among firms. For this purpose, a sequential generalized directional distance function and the Sequential Malmquist-Luenburger (SML) index are used with the assumption of no deterioration in technology over time. The SML is decomposed into two indices: efficiency change (EC) and technical change (TC). The empirical results showed an average increase of 0.3% in environmental productivity measured by the SML over the whole period. Although the overall average value is low, it showed a 0.8% increase after 2015, implying that ETS policy has enhanced environmental productivity. From the decomposition of the SML, it was also found that the EC index (−1.1%) was comparatively lower than the TC index (1.5%) over seven years, implying that the innovation effect leads the environmental productivity of the Korean manufacturing industry. With regard to individual sectors, the seven sub-sectors showed quite different patterns in their performance. Therefore, not only should firms in each sector make an effort to enhance their performance, but the government also needs to support specialized measures to enhance firms’ overall competitiveness.
Highlights
At the recent general assembly meeting of the Intergovernmental Panel on Climate Change (IPCC) at Songdo, on October 1, 2018, the IPCC unanimously approved the “Keeping global warming at 1.5 ◦C” special report [1]
As the Emission Trading Scheme (ETS) proposes a “top-down approach” by the Korean government, it raises the following intrinsic questions for its sustainable performance: Will the ETS be helpful in maintaining national competitiveness? Are emission allocations for each sector reasonable? Which sectors are more beneficial or detrimental to the environment under the current ETS scenario?. To answer all these questions and make feasible suggestions for environmental policies, in the first stage, we analyze the effect of ETS policies on environmental productivity, while in the second stage, we focus on the determinants of environmental productivity
Based on Equations (2) and (3), respectively, the average value of the GDDF was 0.686 and sequential generalized DDF (SGDDF) was 0.641 for the sample period of seven years. This proves that the GDDF could overestimate the real efficiency, and that the SGDDF reflects the field-oriented phenomena more reasonably
Summary
At the recent general assembly meeting of the Intergovernmental Panel on Climate Change (IPCC) at Songdo, on October 1, 2018, the IPCC unanimously approved the “Keeping global warming at 1.5 ◦C” special report [1]. To limit the rise in average temperature to 1.5 ◦C until the year 2100, the 2010 Carbon Dioxide (‘CO2’) emissions per year must be curtailed by 45% by 2030, and net zero emissions must be achieved by 2050. It is an urgent challenge for the entire world to reduce CO2 emissions in order to face the challenge of global warming. According to the Organization for Economic Cooperation and Development (OECD) environmental performance reviews (2017) [2], Korea has recorded the 2nd most rapid growth rate for its Greenhouse Gas (‘GHG’) emissions among OECD countries. There has been strong resistance to this ambitious target from a group of passive firms, implying that environmental policies may lack the governance or workable mechanisms required to achieve sustainable performance
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