A Comparison of Predicted Effects of EU-ETS and K-ETS Using an Optimization Model for Process Industry’s Carbon Offsetting

A mathematical program is proposed for optimization of process industry’s carbon offsetting, and applied to prediction of carbon reduction effectiveness of EU-ETS and K-ETS. Case study indicates that EU-ETS shows high performance in reduction effect owing to high carbon prices, but entails significant accumulation of allowances. As allowances are potential emissions, this means that EU-ETS is moving toward insecure carbon neutrality. K-ETS fails to show a reduction effect, if the carbon price is assumed to increase just according to the current trend. However, if K-ETS is operated according to the stated policies scenario, its 2030 status is predicted to get close to half of EU-ETS in terms of both carbon price and reduction effect. Therefore, the future K-ETS is expected to be able to show a moderate reduction effect, appropriately managing the carbon price and allowance holdings. The result of this study indicates that the effectiveness of ETS depends on the carbon price over the reduction cost, and thus in order to economically improve it, governmental policies are required to lower the reduction cost. The proposed optimization model is expected to be also applicable to optimal planning of a company’s approach to net zero emissions.