Industrial Impacts of Environmental Policies: Focusing on Particulate Matter Abatement Policies in Korea

As social interest in particulate matter (PM) increases, various abatement policies are being discussed and implemented. However, such a policy could lead to economic burdens for industries that emit large amounts of PM. For example, if we aim to limit PM emissions from industrial production processes, cutting production or installing abatement devices incurs costs. Of course in the long run it may be possible to comply with regulations without additional costs through the development of new technologies. However, assuming that firms are currently producing at an optimal level, additional regulations increase costs in the short run. In industries already subject to environmental regulations, including an emissions trading system (ETS) for achieving national greenhouse gas reduction targets, stringent regulations on PM emissions could be an additional burden. The sources of domestic PM emissions can be categorized into four sectors: power generation, industry, transportation, and households. The emissions from the industrial sector accounts for about 40 percent of total domestic emissions. Therefore the role of industry is most important in curbing PM emissions. Despite this, there is a lack of both academic and policy research discussing issues regarding industrial PM emissions. This study investigates the current state of PM emissions in manufacturing industries and corporate perceptions of government regulations on PM emissions, and further estimates the macroeconomic effect of relevant policies. The results and implications of this study are expected to contribute to improving the efficiency of PM abatement policies.