This paper analyzes qualitatively the possibility of carbon leakage in the domestic industry after introducing the Emissions Trading System. This analytic-numerical model is designed considering not only the substitution effect on the relative consumption of goods, but also the abatement resource effect through the movement of production factors. Furthermore, using the model's equilibrium simulations and results, the possibility of carbon leakage is examined by taking into consideration characteristics of industries covered by the domestic emissions trading system. The government might use this paper to counter company arguments that increased control of greenhouse gas emissions will weaken national competitiveness due to carbon leakage.

[Key Words] GHG Reduction Policy, Carbon Leakage, Numerical Analytic Model, Substitution Effect, Abatement Resource Effect