In this study we have analyzed economic costs of carbon taxes imposed on fossil fuels associated with climate change issue in Korea. The model is of a small open economy forward looking dynamic CGE over 1998-2047.
Carbon taxes are imposed on coal, oil, and gas from year 2013 through 2047 the last period of the model. Tax base starts with 100,000 Korean Won/Tonne of Carbon (TC) through KW400,000.
The primary findings through this study are as follows:
First, the primary economic indicators reflecting the results of sensitivity analysis through the study have been estimated that, for instance, in year 2025 for 100,000KW/TC of a carbon tax rate, the EVs span -0.217% to -0.167% and the GDP changes -0.195% to -0.432% while the results in case of 400,000KW/TC are -0.472% to -0.575% for EVs and -0.708% to -1.525% for GDPs.
Second, the quantity of emission reduced due to carbon tax of 100,000KW/TC amounts to 17(25) million TC and the unabated is 1.19(1.78) times 2000 level in 2015(2035). The corresponding economic costs of the abatement in terms of GDP are 1,261 billion Korean Won in 2015 and 4,551 KW in 2035.
Third, the GDP changes resulting from sensitivity analysis are almost identical when assumed a tax rate is 100,000KW/TC and annual growth rate is 3% or 2%: The GDP changes with 3%(2%) growth rate have resulted in –0.025%(-0.023%) in 2005, -0.176%(-0.176%) in 2015, -0.292%(-0.294%) in 2025, -0.347%(-0.350%) in 2035, and -0.371%(-0.374%) in 2045, respectively.
Compared to the previous Korean studies on the carbon tax simulation, we are incline