• Environmental and Resource Economics Review
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• v.14 no.2
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• pp.493-518
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• 2005

It has been taken for 10 years since Climate Change Convention could it be made. And Kyoto Protocol will come into force as an international law as from 16. Feb 2005. As based on it, Annex I countries will implement their mitigation projects on GHG reductions and press developing countries on GHG reduction target. Korea has not duty target on it yet. But it will be held a COP(Conference of Party) on negotiation for reduction target of second commitment period. If Korea has a real duty, Industry sector should reduce GHG emissions. Then Market mechanism will be need to introduce for this. This study started having a question "Is it possible to introduce emissions trading in Korea?". To solve the problem, this study analysed GHG emissions, marginal abatement cost, market price with 11 companies of industry (about 36% of Korea emissions). minus target is impossible to implement reduction target ver base year (2002). And emissions trading scheme also can't make the market without additional policy and measures. This study suggest that it is need to import credits and give a subsidy of government to encourage it. The imported credit can reduce the demand curve within the marginal abatement cost curves. But the effectiveness of credit is not the same as continually growth. As a result, Allowing 40% credit into emissions trading market is the best to reduce costs. However, a subsidy is the little bit difference. A subsidy make marginal abatement cost curves down for itself. Giving 30% for subsidy, it is the best. Considering both of importing credits and subsidy, it is the best effects in the reducing cost for company. especially 30% is the best effects respectively. This Study show that government wants to consider designing emissions trading, encourage participants competitiveness, and encourage the early action, government has to allow credit trading and give a subsidy to participants.