Author: Shinae Park(Sangmyung University), Sangyong Joo(Konkuk University), Eseul Choi(Bank of Korea), Dongjin Lee(Sangmyung University)

<Abstract>

This paper estimated the direct and indirect effects of increased production costs by industry due to the imposition of a carbon tax on achieving Net-zero by 2050 using an improved technique. The direct cost effect of carbon tax increases in energy prices was estimated using GCAM, calculating changes in energy production costs caused by carbon tax burdens and changes in the market supply and demand. The indirect cost effect that is transferred through the linkages between industries was estimated using the Input-Output table. As such results indicated that the cost burden of Net-zero across industries would increase when considering the direct and indirect effects in total, and that producer prices would rise by an average of 0.4%p per year until 2040. Additionally, it was estimated that the rapid growth of new & renewable energy is necessary to minimize the cost burden, and if the share of new & renewable energy is only 75% of the appropriate level, the cost burden of the industry will increase significantly, which could lead to an annual increase of 1%p in producer prices.