A study on the impacts of decarbonisation by the technology innovation and carbon pricing into industry transition and GHG reduction in the NE Asia

Event: East Asian Association of Environmental and Resource Economics (EAAERE)
Date: 5-7 August, 2017, Singapore

The low-carbon technology innovation for climate change mitigation attracts increasing attention from both entrepreneurs and policymakers. The accelerated technology development is expected to achieve the stringent climate goals and reduce the costs.
The existing sophisticated econometric models incorporate a mechanism in it that allows the economy to embody low carbon technology innovation and energy cost reduction efforts in response to rising carbon prices due to carbon pricing. However, since the model paces the development of low carbon technologies by economic entities that respond to carbon prices by default (price elasticity of technology development) given in all industries in the model, it is difficult to determine the actual response of economic entities in response to rising carbon costs. If the analysis period is short, the progress of low carbon technology change will not be done in a short period of time. Therefore, the analysis of the effect of economic low carbon technology innovation by carbon pricing will not make much difference from reality. However, if the analysis period is long, the analysis of the progress of technological innovation by the top-down method as described above is highly likely to be difficult to explain reality.
This study quantitatively analysed the impact of transition of industrial structures under decarbonisation as a result of technological developments on the economy (GDP and employment), industry’s production structure and the environment (the short- and long-term greenhouse gas reduction targets by 2030 and 2050) in the major industries including steel, refining, aluminum, cement, chemistry and other industries in East Asian countries under the assumption that carbon taxes introduced to achieve the greenhouse gases mitigation goal by 2030 under the NDC and 450 scenarios by 2050. Energy - Environment – Economy Model for Global extended with the Future Technology Transformations: Industry model was employed as an analytical method, which adopted the mechanisms that the major energy-intensive industry endogenously choose carbon technology to alleviate the burden of carbon costs in responding to the carbon tax imposition.