Economic Perspective on Discontinuing Fossil Fuel Subsidies and Moving toward a Low-Carbon Society

In Korea, multiple efforts, including subsidies to energy industries, have been made to increase renewable energy use and strengthen the competitiveness of renewable energy industries. Ironically, a considerable number of subsidies have also been provided for fossil fuels, drawing criticism both wit...

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Bibliographic Details
Published in:Sustainability 2021-02, Vol.13 (3), p.1217
Main Authors: Park, Kyungwon, Lee, Yoon, Han, Joon
Format: Article
Language:English
Subjects:
Air pollution
Alternative energy sources
Carbon
Carbon dioxide
Climate change
Coal
Competitiveness
Costs
Drawing and ironing
Electricity distribution
Emissions
Energy
Energy consumption
Energy industry
Energy policy
Energy resources
Expenditures
Fossil fuels
Fuel consumption
GDP
Government spending
Greenhouse effect
Greenhouse gases
Gross Domestic Product
Households
Income distribution
Inequality
Low income groups
Outdoor air quality
Pollutants
Renewable resources
Residential energy
Subsidies
Sustainability
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Summary:In Korea, multiple efforts, including subsidies to energy industries, have been made to increase renewable energy use and strengthen the competitiveness of renewable energy industries. Ironically, a considerable number of subsidies have also been provided for fossil fuels, drawing criticism both within Korea and overseas that these subsidies increase not only fossil fuel consumption and greenhouse gas emissions, but also energy market distortion. Thus, the Korean government announced a plan to discontinue some fossil fuel subsidies in 2020. Based on Korea’s policy orientation to expand renewable energy and strengthen its competitiveness, various scenarios to phase out fossil fuel subsidies and increase renewable energy subsidies can be examined. This study used the computable general equilibrium model to subdivide the energy sector and analyze the influence of changes in subsidies on the Korean economy and CO2 emissions based on three scenarios. The results show that phasing out fossil fuel subsidies causes a significant reduction in domestic CO2 emissions by −6.9 to −8.5%, depending on our scenarios. Implementing energy policy in Korea may have minimum impacts on its economy when fossil fuel subsidies transfer to renewable energy industries. The real gross domestic product could be only decreased by −0.04 to −0.14%.
ISSN:2071-1050
2071-1050
DOI:10.3390/su13031217