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Sustainability 2016, 8(11), 1110; doi:10.3390/su8111110

Are Emissions Trading Policies Sustainable? A Study of the Petrochemical Industry in Korea

Global E-Governance Program, Inha University, Inharo100, Nam-gu, Incheon 402-751, Korea
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Academic Editor: Pauline Deutz
Received: 26 August 2016 / Revised: 18 October 2016 / Accepted: 27 October 2016 / Published: 29 October 2016
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Abstract

In 2015, Korea inaugurated an emissions trading scheme (ETS). In this regard, many studies have considered the sustainable performance and efficiency of industries that emit carbon; however, few have examined ETS at company level. This paper focuses on companies’ data related to Korean ETS in the petrochemical industry. Based on the non-radial, nonparametric directional distance function (DDF), the paper evaluates the governance factors related to ETS policies and sustainable performance in terms of carbon technical efficiency (CTE), the shadow price of carbon emissions, and Morishima elasticity between the input and undesirable output of carbon emissions. Using a dual model, the paper shows that Korean ETS has huge potential for participating companies to improve CTE. If all companies consider the production possibility frontier, they could potentially improve efficiency by 52.8%. Further, Morishima elasticity shows strong substitutability between capital and energy, implying that green technology investment should bring a higher degree of energy-saving performance. Unfortunately, however, the market price of carbon emissions is far too low compared with its shadow price, suggesting that the Korean government’s price-oriented market intervention has resulted in the ETS producing poor sustainable performance. As the title suggests, ETS of Korea is not sustainable at the current stage, but with more efforts on the transition period, all the developing countries should support the governance factors of the ETS in terms of the more effective green investment with easier access to the green technology. View Full-Text
Keywords: ETS; emissions trading scheme; carbon technical efficiency; CTE; shadow price; Morishima elasticity of substitution; governance ETS; emissions trading scheme; carbon technical efficiency; CTE; shadow price; Morishima elasticity of substitution; governance
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Choi, Y.; Lee, H.S. Are Emissions Trading Policies Sustainable? A Study of the Petrochemical Industry in Korea. Sustainability 2016, 8, 1110.

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