Economic Effects of Renewable Energy Expansion Policy: Computable General Equilibrium Analysis for Korea

Abstract

This study examines the effects of renewable energy expansion policy on the Korean economy and industries using the computable general equilibrium model, which divides the power generation sector into detailed generation technologies and sources. The scenarios are set to observe the cases where the share of solar photovoltaic and wind power generation reaches 7%. The effects are examined according to differing circumstances, such as when greenhouse gas (GHG) emissions are regulated, and the funding source for renewable expansion varies. The results show that renewable expansion policies have negative effects on GDP. However, the magnitude of the GDP decline becomes smaller when GHG emissions are regulated. The expansion of renewable energy induces the growth of upstream industries which supply components for renewable generation modules. Regarding employment, the renewable expansion policy can increase the demand for labor. However, the direction and the extent of the effect vary depending on the funding source. When overlapping regulations, such as the emission trading scheme and renewable energy expansion policies, exist in the power generation sector, the renewable energy expansion policy could provide incentives for GHG emission-intensive power sources.