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Can the financial scheme of emission trading affect technology development and sustainability?

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  • Ma, Yunning
  • Huang, Xuhui
  • Lee, Hyoungsuk
  • Choi, Yongrok
  • Tsai, Fu-Sheng

Abstract

South Korea launched its national carbon emissions trading scheme (ETS) in 2015, yet its effectiveness in promoting low-carbon transformation and emissions reduction within the electric utility sector remains contentious. Electric utilities dominate energy consumption and carbon emissions, making their policy responses critically important. Specifically, this study utilizes financial, energy consumption, emissions, and R&D data from electric utilities between 2013 and 2022. Employing a difference-in-differences strategy, utilities are divided into treatment and control groups based on pre-policy emission intensity. The analysis focuses on three key indicators: Carbon Total Factor Productivity (CTFP), Morishima Elasticity of Substitution (MES), and Marginal Abatement Cost (MAC). Results indicate that ETS significantly enhanced utilities’ CTFP, primarily through efficiency gains rather than technological frontier expansion. It also increased MAC, signaling rising emission reduction costs, while showing no significant impact on MES, suggesting no fundamental shift in the structural relationship between output and emissions. Given the electric utility sector’s central role in national emission reduction strategies, these findings hold significant implications for understanding ETS’ policy effectiveness and future refinement pathways.

Suggested Citation

  • Ma, Yunning & Huang, Xuhui & Lee, Hyoungsuk & Choi, Yongrok & Tsai, Fu-Sheng, 2026. "Can the financial scheme of emission trading affect technology development and sustainability?," Research in International Business and Finance, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:riibaf:v:81:y:2026:i:c:s0275531925004672
    DOI: 10.1016/j.ribaf.2025.103211
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