The Bank of Korea: "Carbon Emission Regulations May Negatively Impact Manufacturing-Centered Production"

Report on 'Impact of Climate Change Response on Industry' Published on the 30th

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] An analysis has emerged suggesting that carbon emission regulations could potentially shrink production, particularly in major manufacturing sectors.

On the 30th, Park Jonghoon, Manager of the Trend Analysis Team at the Research Department of the Bank of Korea, and Researcher Inayoon stated in their report titled "The Impact of Climate Change Response on Industry" that "the full-scale implementation of carbon emission regulations may lead to a contraction in production centered on major manufacturing industries if accompanied by no reduction efforts."

They further noted that since the increase in carbon dioxide emissions in the manufacturing sector was mainly due to export expansion, the contraction in industrial production is expected to lead to a decrease in exports.

They examined the degree of impact by industry by setting carbon tax rates for each sector. Regarding industrial structure, the production share of manufacturing was found to decline. In particular, the shares of transportation equipment (annual average -0.02% to -0.25 percentage points from 2020 to 2050) and primary metal products (-0.01 to -0.14 percentage points) were estimated to decrease relatively significantly.

Regarding production costs, manufacturing sectors such as primary metal products (annual average increase of 0.8% to 4.5% from 2020 to 2050), fabricated metal products (0.6% to 3.5%), and transportation equipment (0.5% to 3.0%) showed relatively higher growth rates compared to service industries. By transmission channels, indirect effects from other industries were found to be greater than direct impacts on the respective industries.

The Bank of Korea emphasized that various support measures, such as subsidies for installing emission reduction devices and incentives for reducing energy use, should be implemented to minimize side effects during the carbon neutrality transition process.

They also pointed out that even if some industries do not emit large amounts of carbon dioxide during their processes, the scale of damage such as cost increases and production decreases through indirect channels during the carbon neutrality transition is expected to be significant, so it is necessary to accurately assess the damage scale by industry.

Meanwhile, the Bank of Korea stated, "Considering that carbon emissions vary by industry, the negative impacts of implementing carbon neutrality are expected to appear differently across industries."

This content was produced with the assistance of AI translation services.