Climate change mitigation policy and sustainable economic growth : the case of South Korea
Creators: name: Park, Hyejin
Publisher: name: The Australian National University
Year: 2015

description: This thesis examines the economy-wide impacts of achieving South Korea's carbon dioxide (CO2) emissions reduction target under the Copenhagen Accord using a model-based approach. The approach followed is to develop a version of the G-Cubed model, including South Korea as a separate economy within the global modelling framework. This enables a large amount of detail on the Korean economy to be analysed as well as capturing the significant trade and financial linkage between Korea and other individual countries. Using the model, comprehensive and quantitative analyses on the climate change policies of South Korea are performed to (1) discuss the adequacy of South Korea's CO2 emissions reduction target and its economic influence on the country, including a comparison of the mitigation efforts of other countries, (2) empirically address the feasibility of the proposed international carbon trading scheme, and (3) explore the most efficient and sustainable climate change mitigation policy framework for South Korea under uncertainty. From this, it is found that the standardised South Korean emissions reduction target which is about a 30 percent reduction relative to business-as-usual (BAU) emissions by 2020, is less stringent compared to developed countries, such as the US, EU, Japan and Australia, while it is more stringent than other developing countries like China and India. However, the estimated carbon price for South Korea to reach the reduction target is as high as those of the developed countries or much higher than the developing countries due to its energy-intensive economic structure. The relatively higher emissions mitigation cost for South Korea to reach its target will have negative effects on the economy, resulting in a significant GDP loss and weakened international competitiveness. Emissions trading schemes are considered as a way to reduce the relatively high carbon price by trading emissions permits with countries where the reduction cost is relatively low. However, the analyses performed using the Korean version of the G-Cubed model show that such emissions trading schemes are neither feasible nor sustainable for achieving the emissions mitigation target of South Korea in scenarios of global and regional cooperation, particularly in the Asia-Pacific region. This is mainly because of the reluctance of countries with relatively lower marginal abatement costs to join the international carbon trading scheme where international transfers are insufficient. This shows that an international carbon market will be unsustainable unless legally binding international agreements which regulate emissions in developing countries are made. Lastly, from a comparative analysis of economic impacts of three policy frameworks, including (1) a cap and trade emissions trading scheme, (2) a carbon tax, and (3) the McKibbin Wilcoxen Hybrid policy, the hybrid approach is found to achieve the emissions reduction target of South Korea with the lowest loss of both GDP and consumption. The hybrid policy which performs like a carbon tax or a cap and trade scheme depending on the macro-economic situation, provides flexibility and sustainability in designing, developing and implementing South Korea's green growth strategy.