This study quantifies the impact of major climate policies on industrial competitiveness in manufacturing sectors that require large-scale decarbonization in the future. Two climate policies, the Target Management System for GHG and Energy (TMS), a command-and-control type policy introduced in 2011, and the Emission Trading System (ETS), a market-friendly policy introduced in 2015, are mainly considered, where both policies cover selected companies that emit heavily. Based on pathways through which climate policies can affect industrial competitiveness, we estimate impacts of the abatement burden through channels of the level of energy intensity (energy consumption per production) and the level of emission intensity (emissions per energy use) by covering 2011~2019. Furthermore, based a firm-level survey, we estimate determinants that drive and hinder the implementation of abatement practices and determinants that enhance environmental and economic performance.

As a result of the analysis, during the last 10 years (2011-19) it was confirmed that the higher the level of energy intensity and emission intensity, the negative impact on production cost and value added, which are direct indicators of the manufacturing industry’s competitiveness, was greater. Impacts become greater when limiting to the energy-intensive and emission-intensive sectors, such as “iron and steel”, “non-ferrous metals”, “chemicals”, “petroleum refining”, and “non-metal” industries. Meanwhile, it is found that there is no signficant impact on sales. Overall, it is understood that the upward pressure on production costs was at a level that could be endured through a decrease in value added rather than leading to a decrease in production. Furthermore, it is confirmed that while negative impacts on competitiveness through energy-intensity has gradually increased during the analysis period, that through emission-intensity has decreased after the introduction of ETS. Meanwhile, burden of carbon abatement has not yet been realized in earnest for some large companies that have been active in introducing abatement measures. Nevertheless, in line with the strengthening of climate policies in the future, policy considerations to ensure the sustainability of the manufacturing sector should be accompanied.

Policy suggestions this study provides are tow-fold. First, it is necessary to understand the extent to which TMS and ETS actually affect and to identify detailed impact pathways. Considering the results of previous studies and this study, there is a possibility that in the manufacturing industry the distribution of abatement burden is not proportional to that of emissions. Therefore, it is essential to broaden the perspective and consider impact pathways at the level of the production and supply chain. Second, it is necessary to set TMS targets and allocate ETS allowances using multiple indicators. Industries with high direct emissions such as fuel combustion can lower their emission intensity through their own strategies (switching to environmentally friendly fuels, etc.), while in industries with high indirect emissions, energy intensity adjustment may be a more effective means than emission intensity adjustment. Altogether, it needs to enhance the sustainability of manufacturing industry in the process of decarbonization by differentially allocating as much burden as necessary to the firms under TMS and ETS, and by alleviating the burden that firms outside the system may bear in a disproportionate way to their emissions.

Preface
Executive Summary

Chapter 1 Introduction

Chapter 2 Major Greenhouse Gas(GHG) Reduction Policy Measures
　Section 1 Target Management System(TMS) for GHG and Energy
　Section 2 Emission Trading System
　Section 3 Other Greenhouse Gas Reduction Policies

Chapter 3 Industry-Level Analysis
　Section 1 Major Prior Research and Analysis Methods
　Section 2 Analysis Data
　Section 3 Analysis Results

Chapter 4 Enterprise-level Analysis
　Section 1 Analytical Methods and Data
　Section 2 Analysis Results

Chapter 5 Conclusion and Policy Implications
　Section 1 Major Conclusions
　Section 2 Policy Implications

References
Appendix
ABSTRACT