Impacts of Green Energy Expansion and Gas Import Reduction on South Korea’s Economic Growth: A System Dynamics Approach

Abstract

South Korea, ranking ninth among the largest energy consumers and seventh in carbon dioxide emissions from 2016 to 2021, faces challenges in energy security and climate change mitigation. The primary challenge lies in transitioning from fossil fuel dependency to a more sustainable and diversified energy portfolio while meeting the growing energy demand for continued economic growth. This necessitates fostering innovation and investment in the green energy sector. This study examines the potential impact of green energy expansion (through integrating renewable energy and hydrogen production) and gas import reduction on South Korea’s economic growth using a system dynamics approach. The findings indicate that increasing investment in green energy can result in significant growth rates ranging from 7% to 35% between 2025 and 2040. Under the expansion, renewable energy scenario (A) suggests steady but sustainable economic growth in the long term, while the gas import reduction scenario (B) displays a potential for rapid economic growth in the short term with possible instability in the long term. The total production in Scenario B is USD 2.7 trillion in 2025 and will increase to USD 4.8 trillion by 2040. Scenario C, which combines the effects of both Scenarios A and B, results in consistently high economic growth rates over time and a substantial increase in total production by 2035–2040, from 20% to 46%. These findings are critical for policymakers in South Korea as they strive for sustainable economic growth and transition to renewable energy.