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The economic value of LNG in the Korean manufacturing industry

Author

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  • Park, Sun-Young
  • Yoo, Seung-Hoon

Abstract

Although LNG is an important input to industrial production for manufacturing firms, its economic value has been rarely investigated in the literature. This paper attempts to estimate the economic value of LNG in Korea's manufacturing sector by employing the concept of the value of marginal product (VMP). For this, we used data on 328 firms using LNG as an input. Two types of production functions (the Cobb–Douglas and trans-log functions) are applied. The result of the specification test indicates that the trans-log function is more appropriate for estimating the data. The output elasticity and VMP of industrial LNG are estimated to be 0.1346 and KRW 6844 (USD 6.22) per m3, respectively. The results have important implications for various areas of industrial LNG management. For example, any cost–benefit analysis of new projects providing industrial LNG requires information on the economic value of industrial LNG. In addition, such information is useful for the Korean government's future policies on LNG pricing.

Suggested Citation

  • Park, Sun-Young & Yoo, Seung-Hoon, 2013. "The economic value of LNG in the Korean manufacturing industry," Energy Policy, Elsevier, vol. 58(C), pages 403-407.
  • Handle: RePEc:eee:enepol:v:58:y:2013:i:c:p:403-407
    DOI: 10.1016/j.enpol.2013.03.031
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    References listed on IDEAS

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    1. Abadie, Luis M. & Chamorro, José M., 2009. "Monte Carlo valuation of natural gas investments," Review of Financial Economics, Elsevier, vol. 18(1), pages 10-22, January.
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    3. Kumar, Satish & Kwon, Hyouk-Tae & Choi, Kwang-Ho & Hyun Cho, Jae & Lim, Wonsub & Moon, Il, 2011. "Current status and future projections of LNG demand and supplies: A global prospective," Energy Policy, Elsevier, vol. 39(7), pages 4097-4104, July.
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    Cited by:

    1. Lim, Seul-Ye & Kim, Hyo-Jin & Yoo, Seung-Hoon, 2016. "The demand function for residential heat through district heating system and its consumption benefits in Korea," Energy Policy, Elsevier, vol. 97(C), pages 155-160.
    2. Almansoori, Ali, 2014. "The influence of South Korean energy policy on OPEC oil exports," Energy Policy, Elsevier, vol. 67(C), pages 572-582.
    3. Park, Eunil & Kwon, Sang Jib, 2016. "Solutions for optimizing renewable power generation systems at Kyung-Hee University׳s Global Campus, South Korea," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 439-449.
    4. So-Yeon Park & Seul-Ye Lim & Seung-Hoon Yoo, 2016. "The Economic Value of the National Meteorological Service in the Korean Household Sector: A Contingent Valuation Study," Sustainability, MDPI, Open Access Journal, vol. 8(9), pages 1-13, August.

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