A Study on GHG Abatement Costs in Korea: International Emissions Trading and Major Sectors of Carbon Reduction

In this paper, we estimate the cost of the GHG abatement target by Korean government using a trade-based model, GTAP-E, after updating all the database of industrial and trade structures as well as carbon dioxide emissions of most of regions of the world. Major findings of this paper are as follows. First, estimates of the costs, GDP and welfare costs as well as abatement cost, of the GHG abatement target differ substantially by two things: (1) assumption on carbon reductions in other countries (the reduction only in Korea or commitments with Annex I countries), (2) assumption on international emission trading. Second, governmental policy to set sectoral abatement target would increase the costs than otherwise in spite of the same level of the carbon reduction. But in the case of mild adjustments of sectoral targets by the government, the policy with more reductions in industrial sectors than private consumptions are absolutely better than the other (reducing more in private consumptions).