THE ECONOMIC IMPACTS OF IMPLEMENTING NET ZERO POLICIES IN KOREA: A COMBINED TOP-DOWN AND BOTTOM-UP APPROACH

Abstract

The South Korean government aims to achieve carbon neutrality by 2050. Here, this study analyzed the economic efforts of the net-zero policy by integrating top-down and bottom-up models; The UNIfied Climate Options Nexus (UNICON) within this study aims to create a link between the 26 sectors from the bottom-up model and the 85 sectors of the top-down model. Positive mathematical programming methods were used to ensure consistency between the top-down and bottom-up models within the base year. The study found that the total reduction rate was slightly higher in the integrated model than in the computable general equilibrium (CGE) stand-alone model. In both models, the reduction rate increased when the carbon tax increased, but the marginal reduction rate was considerably lowered, and the reduction rate did not exceed 80% even with the high level of a carbon tax. The technological change of the linked industries in the integrated model showed that the steel industry had the highest emission reduction. When estimating costs for reducing GHGs, results can vary based on the technological changes under consideration.