“Annual Sales Revenues of Manufacturers to Drop 28% Maximum due to Emission Trading System”

The annual sales revenues of Korean manufacturing companies are expected to drop by a minimum of 8 to 29 trillion won (US$7.8 to 28.1 billion), when the emission trading system becomes effective.

Lee Sun-hwa, a researcher at the Korea Institute of Local Finance, claimed such at the “Seminar for Emission Trading System and Subsidies on Low Carbon Automobiles” held by the Korea Economic Research Institute on July 16.

Researcher Lee provided four scenarios. By scenario, the decline in sales revenue ranged from 8.4 trillion won (US$8.1 billion) minimum to 29.6 trillion won (US$28.7 billion) maximum. These calculations are based on the price of a per-ton emissions trading system predicted by the E.U. The E.U. projected that such a price will be €22 (approximately 30,000 won or US$29.76) by 2020, based on a 20 percent decline in emissions.

Researcher Lee predicted, “Product prices will rise due to the increasing costs of minimizing carbon emissions and intermediary goods, which causes fewer domestic sales and exports. After all, total sales revenues of manufacturers, especially in the steel, cement, nonferrous metal, and chemical industries, will decline as well. Even with the minimum decrease scenario, sales will drop 14.9 percent in the cement industry and 4.9 percent in the steel industry."

Some point out that the gross regional domestic product (GRDP) will decline due to the emissions trading system as well. This will inevitably hurt the regions with a lot of carbon emissions. Kim Young-duk, an economics professor at Busan National University, said, “By 2015, GRDP in the metropolitan area [Seoul and Gyeonggi-do] will drop 1.11 percent, in Gangwon-do 1.06 percent, in Jeolla-do 1.37 percent, and in Gyeongsangnam-do 1.53 percent. The employment rate will also decline by 3.14 percent in Gangwon-do, 2.63 percent in Jeolla-do, and 2.23 percent in Gyeongnam.”

Park Gwang-soo, chief researcher at the Korea Energy Economic Institute, pointed out, “Low income households are more dependent on high cost petroleum products, and harder-to-cut fuel expenses. The emissions trading system will cause more burdens to low-income households by increasing fuel costs.”