An Analysis of Offset Emission Permit Pricing Factors in the Korean Carbon Market

Dong Hoon Shin; Dongwook Kim

doi:10.31686/ijier.vol10.iss10.3912

Authors

Dong Hoon Shin

Inha University

https://orcid.org/0000-0001-7746-3570
Dongwook Kim

Texas A&M University – Kingsville

https://orcid.org/0000-0002-1178-3720

DOI:

https://doi.org/10.31686/ijier.vol10.iss10.3912

Keywords:

KOC, KAU, ARDL model, Emission Allowance, Korean Carbon market

Abstract

This study aims to empirically analyze the long-run and short-run equilibrium relationship between the price of Korea Offset Unit (KOC) listed and traded on the Korean Exchange since May 2016, and the variables affecting it, such as Korea Allowance Unit (KAU) price, oil, electricity, economic survey prospect index of the general manufacturing business, heating index and cooling index. In general, research on emission permit prices is conducted on the demand side and the supply side. This study analyzes the relationship in the demand side, and weekly time series data for about 6 years from the end of May 2016 were used with the ARDL model. As a result of the empirical analysis, KOC showed a positive correlation between KAU and oil price, and showed a negative correlation with the prospect of Business Survey Index in the long run. In the short term, KAU, oil price, and electricity price showed a positive correlation, and the prospect of Business Survey Index showed a negative correlation.

Author Biographies

Dong Hoon Shin, Inha University

Associate professor, Dept. of Global Finance and Banking
Dongwook Kim, Texas A&M University – Kingsville

Assistant professor, Dept. of Mathematics

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