The Introduction of a Carbon Market: A Regression Analysis of the Impacts on Participating Firms

Authors

Zachery Sehnert, University of Nebraska-Lincoln

Date of this Version

2020

Document Type

Article

Citation

Environmental Studies Undergraduate Student Thesis, University of Nebraska-Lincoln, 2020.

Comments

Copyright 2020 Zachery Sehnert

Abstract

In this study, we strive to analyze the economic impacts on the firms participating in an emission trading system. Many studies have analyzed the impact on emission control and whether or not it is an effective tool in reducing greenhouse gas emissions. This was achieved by running a log regression of sales against emissions from before and after the introduction of the carbon market. The statistical technique of Difference in Differences (DID) was used to observe the outcome against a control group, or those that had not participated in said market. The Korea Emission Trading Scheme (KETS) was the focus of this study as it is relatively new and not many studies of this sort have been conducted for the region. Unfortunately, the KETS has seen it’s share of issues in the rollout of this policy which in turn has resulted in a strain on those firms participating in the market. Shortage of permits, Emission cap disputes, and international opinion concerns have led to a reduction of 20 percent in production and an 18 percent reduction in efficiency as compared to where these firms would have been had they not entered the carbon market.