Leakage Risks in South Korea: Potential Impacts on Global Emissions

The document evaluates the potential for carbon leakage in South Korea as it implements the Korean emission trading scheme (KETS). Using methodology from the EU ETS Directive, the analysis finds that several manufacturing sectors face a moderate to high risk of leakage, primarily driven by high trade intensity rather than additional production costs. The report highlights that while energy efficiency and fuel switching have historically reduced emissions intensity, the recovery of emission-intensive industries like steel and cement has increased structural risks. It recommends that the South Korean government consider mitigation policies such as free allowances, border adjustments, or import taxes to prevent the displacement of emissions to regions with less stringent climate policies.

• The Korean emission trading scheme (KETS), scheduled for launch in January 2015, is designed to cover approximately 70% of the country's greenhouse gas emissions, specifically targeting the power and industry sectors in its first three phases.
• Decomposition analysis of CO2 emissions from 2000 to 2009 shows that for the overall economy, the output effect was the primary driver of emission increases, which was partially offset by a negative intensity effect from clean technologies and energy management.
• In the manufacturing sector, a pronounced structural effect has increased CO2 emissions as the economy shifted back toward emission-intensive industries such as cement, iron, and steel following the 1997 financial crisis recovery.
• The assessment identifies that eight manufacturing sectors are at potentially high risk of carbon leakage, with this risk being driven significantly by high trade intensity rather than additional production costs.
• Specific manufacturing sectors identified as having a 'High Risk' of carbon leakage based on trade intensity (Criterion III) include chemicals and chemical products, textile and textile products, transport equipment, electrical and optical equipment, machinery, and leather and footwear.
• Sectors such as 'Coke, refined petroleum and nuclear fuel' and 'Other non-metallic mineral' are classified as high risk across multiple criteria, including both additional production costs and trade intensity.
• To mitigate leakage, the document suggests the South Korean government consider policies such as free allocation of allowances, border tax adjustments, output-based export rebates, or import taxes on CO2-intensive products from non-abating countries.

APA

Roy, J., Ghosh, D., & Ghosh, S. (2013). Leakage Risks in South Korea: Potential Impacts on Global Emissions. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2016/01/cs-roy-et-al.-policy-paper-3-rev.-3-format.pdf

Chicago

Roy, Joyashree, Duke Ghosh, and Sohini Ghosh. Leakage Risks in South Korea: Potential Impacts on Global Emissions. Climate Strategies, 2013. https://climatestrategies.org/wp-content/uploads/2016/01/cs-roy-et-al.-policy-paper-3-rev.-3-format.pdf.

Wikipedia

{{cite report |last1=Roy |first1=Joyashree |last2=Ghosh |first2=Duke |last3=Ghosh |first3=Sohini |title=Leakage Risks in South Korea: Potential Impacts on Global Emissions |publisher=Climate Strategies |date=November 2013 |url=https://climatestrategies.org/wp-content/uploads/2016/01/cs-roy-et-al.-policy-paper-3-rev.-3-format.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{roy2013leakage, author = {Roy, Joyashree and Ghosh, Duke and Ghosh, Sohini}, title = {{Leakage Risks in South Korea: Potential Impacts on Global Emissions}}, institution = {Climate Strategies}, year = {2013}, month = nov, url = {https://climatestrategies.org/wp-content/uploads/2016/01/cs-roy-et-al.-policy-paper-3-rev.-3-format.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }