Measuring the Economic Benefits of Industrial Natural Gas Use in South Korea

Abstract

Natural gas (NG) is an important input used in the industrial production of South Korea. Therefore, the government requires quantitative information to be provided about the economic benefits of industrial NG (ING) use to decide whether to invest in expanding the supply of ING or not. This manuscript tries to measure the economic benefits of NG use in the manufacturing industry by using a specific case in South Korea. For this purpose, a trans-log production function is estimated using the data collected from a national survey of 1100 firms in South Korea. Of them, 299 firms used ING. For a representative manufacturing firm, the point estimated for the economic benefits of ING use is obtained as KRW 2409 (USD 2.07) per m 3 , which is statistically meaningful. The average price of ING, which is defined as the total expenditure on ING purchased in 2016 and divided by the total amount of ING purchased in 2016, was KRW 667 (USD 0.57) per m 3. Therefore, the economic benefits of ING use are 3.61 times as great as the average price of ING. This implies that ING produces more value than its price in South Korea.

Natural Gas or Algal Reef: Survey-Based Valuations of Pro-Gas and Pro-Reef Groups Specifically for Policy Advising

“…The WTP values obtained in this research make sense and are justified by both domestic and international comparisons among similar studies. While it is not easy to compare our research to that of Kim et al [24], both our research and theirs found that the natural-gas-related value is high. In addition, our natural-gas-related value estimates are somewhat higher than those of Damigos et al, Jang et al, Moreira and Caetano,and Kim et al [11,[21][22][23].…”

“…The health, climate, and nonhealth benefits were 9.7 million €, 8 million €, and 1053 million €, respectively, and the social costs were 1053 million €. In addition, Kim et al used the translog production function to find that the value of industrial natural gas (ING) was USD2.07 per m 3 , which was 3.61 times as much as the average price [24]. Though not directly estimating the WTP of natural gas, Woo et al found that Korean households were willing to pay USD1.80 per month to replace nuclear power with renewables or LNG [19].…”