Carbon Prices Affordable for the Companies in Northeast Asia - with the Republic of Korea and China as the Cases

This paper estimates the affordability of energy cost increases for energy-intensive companies in the Republic of Korea and China due to the possible introduction of carbon pricing policies. The data were collected from 62 and 170 respondents mainly from iron & steel, cement and chemical industries of Korea and China, respectively, using a multiple-bounded discrete choice (MBDC) format. The simulation results indicate that a mean of 2.57% and 8.84% of energy cost increases would be acceptable individually for the samples in Korea and China. The Korean companies in the three sectors express similar affordability, with the range of acceptable energy cost increases in average being 2.55-2.77%. The affordable policy induced energy cost increases equal to carbon prices at around 9,000-10,000 KRW/t-CO₂ (about 9USD/t-CO₂) for petro-chemical and Iron & steel sector and about 7,000 KRW/t-CO₂ (about 6.6USD/t-CO₂) for cement industries. For the survey in China, the chemical companies express a slightly higher affordability, with the mean of acceptable ratios of energy cost increases being 9.92%, while the cement companies show a little bit lower affordability with a mean of 7.72%. The mean of affordable energy cost increases roughly equals a carbon price of 102.9 Yuan/t-CO₂ (about 15 USD/t-CO₂) for chemical companies and around 40 Yuan/t-CO₂ (about 6 USD/t-CO₂) for iron & steel and cement sectors in China. These results provide meaningful referendums during the development of carbon tax policy and the domestic greenhouse gas emissions trading scheme in the two countries, from the perspective of industries.