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Covering Indirect Emissions Mitigates Market Power in Carbon Markets: The Case of South Korea

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  • Sunghee Shim

    (Korea Energy Economics Institute, Jongga-ro 405-11, Jung-gu, Ulsan 44543, Korea)

  • Jiwoong Lee

    (Korea Energy Economics Institute, Jongga-ro 405-11, Jung-gu, Ulsan 44543, Korea)

Abstract

One of the main concerns of policymakers regarding emissions trading markets is that some firms may well enjoy market power owing to their share of the emissions. This study shows that including indirect emissions within the coverage of an emissions trading scheme can help to reduce market power and thereby enhance social efficiency. In this study, the market concentration measured by the Herfindahl-Hirschman Index significantly drops after including indirect emissions in the South Korean emissions trading market. In addition, other market concentration measures are also considered to verify that the conclusion does not depend on the choice of concentration measures.

Suggested Citation

  • Sunghee Shim & Jiwoong Lee, 2016. "Covering Indirect Emissions Mitigates Market Power in Carbon Markets: The Case of South Korea," Sustainability, MDPI, vol. 8(6), pages 1-11, June.
    • Handle: RePEc:gam:jsusta:v:8:y:2016:i:6:p:583-:d:72435
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    References listed on IDEAS

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    Cited by:

    1. Yong-Gun Kim & Jong-Soo Lim, 2021. "Treatment of indirect emissions from the power sector in Korean emissions trading system," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(3), pages 581-592, July.

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