An emissions trading scheme design for power industries facing price regulation

Kim, Yong-Gun; Lim, Jae-Han

doi:10.1016/j.enpol.2014.07.011

Cited by 33 publications

(23 citation statements)

References 10 publications

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“…However, the carbon price pass through mechanism of the competitive market does not work in the Korean ETS in the presence of market imperfection and government price regulation on the electricity sector [6]. Under this background, the Korean ETS covering indirect emissions has been implemented as a demand-side measure, since it makes consumers pay for the additional carbon price when they consume electricity [2,6].…”

Section: Distinctive Features Of the Korean Etsmentioning

confidence: 99%

“…Under this situation, the price of electricity cannot be adjusted properly to reflect the additional cost from emissions by fossil fuel combustion in electricity generation when the ETS is implemented. Thus, the government is imposing a carbon price on electricity consumers by regulating indirect emissions to transfer the burden of emissions abatement partially to the consumption side [6].…”

Section: Distinctive Features Of the Korean Etsmentioning

confidence: 99%

“…For example, the China regional level ETSs have been implemented in seven provinces as pilot schemes since 2013 [26][27][28]. The electricity sector in China is also heavily regulated by the government, and the carbon costs cannot be easily passed on to consumers, which may be a cause of market distortions [6,27,28]. Another important consideration for including indirect emissions is that in some provinces, indirect emissions (occurring by using electricity imported from other provinces) account for a significant share of total emissions [27].…”

Section: Distinctive Features Of the Korean Etsmentioning

confidence: 99%

“…In particular, the Korean ETS regulates indirect emissions from the consumption of electricity, whereas the EU ETS considers only direct emissions. This structural difference of the Korean ETS can lead to double counting in emissions accounting since the activities of generating and consuming electricity require the simultaneous use of emissions allowances [2,[4][5][6]. Nevertheless, the Korean government has pushed accounting for indirect emissions for the following reasons: (1) reducing the electricity intensity of the economy; (2) transferring the carbon price to the consumption side; and (3) equally spreading the burden of emissions abatement across industrial sectors.…”

Section: Introductionmentioning

confidence: 99%

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

Yeo

Lee

2015

Sustainability

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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.

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Section: Distinctive Features Of the Korean Etsmentioning

confidence: 99%

Section: Distinctive Features Of the Korean Etsmentioning

confidence: 99%

Section: Distinctive Features Of the Korean Etsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

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

Yeo

Lee

2015

Sustainability

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“…On the other hand, including indirect emissions can serve as a second-best option when electricity markets are heavily regulated and electricity prices are not determined purely by supply and demand in the market as in South Korea [4]. As is well known, the market intervention of the government, such as price control, may prevent the carbon price from being passed through completely in retail prices.…”

Section: Introductionmentioning

confidence: 99%

Covering Indirect Emissions Mitigates Market Power in Carbon Markets: The Case of South Korea

Shim¹,

Lee²

2016

Sustainability

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Abstract:One of the main concerns of policymakers regarding emissions trading markets is that some firms may well enjoy market power owing to their share of the emissions. This study shows that including indirect emissions within the coverage of an emissions trading scheme can help to reduce market power and thereby enhance social efficiency. In this study, the market concentration measured by the Herfindahl-Hirschman Index significantly drops after including indirect emissions in the South Korean emissions trading market. In addition, other market concentration measures are also considered to verify that the conclusion does not depend on the choice of concentration measures.

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Treatment of indirect emissions from the power sector in Korean emissions trading system

Kim

Lim

2020

Environ Econ Policy Stud

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This paper analyzes the effects of carbon pricing on the economy, focusing specifically on the power sector under retail-price control. A simulation analysis using a CGE model implicates that it is desirable not to bestow the power sector with carbon pricing waiver to avoid a severe burden to the economy in terms of real GDP and real consumption. And excessive carbon price burden on GHG emissions in the power sector under Korean emissions trading system, where not only direct but also indirect emissions are covered, can and needs to be relieved through intensity-based (output-based) updating allocation of allowances to the power sector. Finally, we have reached a somewhat counter-intuitive conclusion that we can achieve higher economic efficiency by treating both fossil and non-fossil power plants equally when implementing the output-based updating allowance allocation for the power sector.

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An emissions trading scheme design for power industries facing price regulation

Cited by 33 publications

References 10 publications

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

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

Covering Indirect Emissions Mitigates Market Power in Carbon Markets: The Case of South Korea

Treatment of indirect emissions from the power sector in Korean emissions trading system

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