Korea's emissions trading system for low-carbon energy and economic transformation: a quantitative study evaluating the impact of phase I of the KETS on energy efficiency and the energy mix (vol 16, 13, 2023)

Korea’s emissions trading system (KETS) has completed its first commitment period (2015–2017), and began its third period (2021–2025) in 2021. In this paper, we examine the effectiveness of the KETS in stimulating the transition to a low-carbon economy. Micro data collected by the Greenhouse Gas Inventory and Research Center (GIR) are used for our empirical exercise. A duration curve is designed to depict the energy composition of the KETS manufacturing sector and carbon intensities of energy sources that make up the curve. We find that a few meaningful changes have been made since the KETS launched in 2015, but the level of changes is very small. A panel data analysis delivered similar findings: the energy intensity of KETS firms was originally higher than that of non-ETS firms but improved with the adoption of the KETS in 2015. At the same time, the KETS itself is not effective in transforming the energy mix into a low-carbon one, but a strict allocation which enforces a reduction burden for covered firms is effective for increasing the energy share of low-carbon fuels. It should be noted that the impact level is very small for both (energy intensity and energy mix), although statistically valid.