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

Author

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  • Inha Oh

    (Department of Advanced Industry Fusion, Konkuk University, Gwangjin-gu, Seoul 143-701, Korea)

  • Yeongjun Yeo

    (Technology Management, Economics and Policy Program, Seoul National University, Gwanak-gu, Seoul 151-742, Korea)

  • Jeong-Dong Lee

    (Technology Management, Economics and Policy Program, Seoul National University, Gwanak-gu, Seoul 151-742, Korea)

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.

Suggested Citation

  • Inha Oh & Yeongjun Yeo & Jeong-Dong Lee, 2015. "Efficiency versus Equality: Comparing Design Options for Indirect Emissions Accounting in the Korean Emissions Trading Scheme," Sustainability, MDPI, vol. 7(11), pages 1-21, November.
    • Handle: RePEc:gam:jsusta:v:7:y:2015:i:11:p:14982-15002:d:58630
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