Chapter 5. Conclusion and Policy Implications
2. Policy Implications
2.3. Implications for Environment and Energy Tax Policies
The table below shows the emission factors of air pollutants such as Bunker C, LPG, and city gas (LNG), which were considered in the relationship of alternative energy sources in this study.
Table 5-2. Air Pollutant Emission Coefficients by Fuel
NOx SOx PM10 PM2.5 NH3
Bunker C 6.64 14.3S 1.0087S+0.35763 0.57715S+0.19066 0.096
LPG 1.157 0.005 0.036 0.036 0.013
LNG 3.7 0.01 0.03 0.03 0.051
Source: National Institute of Environmental Research (February 2015), “Air Pollutant Emission Factors (emission amount from 2012).”
Note: Emission factors for incineration facilities in the manufacturing industry (Boiler types 1, 2, and 3), Units: kg/kl for Bunker C and LPG and kg/1,000m3 for LNG.
The above table shows that Bunker C is more harmful to the environment than LPG and city gas.
Bunker C emits a significantly larger amount of harmful pollutants compared to LPG and LNG, such as nitrogen oxides (NOx), sulfur oxides (SOx), and ammonia (NH3), as well as fine particulate matter (PM10, PM2.5), which has become a serious social problem in recent years. For this reason, the Korean government has consistently reduced the consumption of Bunker C. However, Figure 5-1 (below) shows that the share of Bunker C consumption, which has been in decline, rose slightly from 2014 to 2016.
This is because the price competitiveness of city gas had been greatly weakened during the same period, significantly reducing the share of city gas consumption due to the resumption of the material cost linkage system, collection of receivables by KOGAS, and plunge of international oil prices.
Figure 5-1. Percentage of Fuel Consumption by Industry
Source: Yearbook of Energy Statistics.
As shown in Figure 5-2 (below), the industry that currently consumes the most Bunker C is the petrochemical industry. According to this study, the energy consumption of the petrochemical industry is very sensitive to the relative energy prices. The relative price elasticity of Bunker C/gas for city gas demand was between 1 and 1.5 before 2012, but has since risen steadily, reaching up to 3.3 after 2016.
This means that if the relative price of Bunker C/gas is changed by imposing a more aggressive tax on Bunker C, all of Bunker C can be quickly replaced with city gas. Considering the flexibility in the replacement of energy sources in the petrochemical industry, which uses the largest percentage of Bunker C, a small price adjustment can be expected to have a great effect.
Figure 5-2. Percentage of Bunker C Consumption by Industry in 2018
Source: Monthly Energy Statistics, August 2019.59
석유화학 Petrochemical
철강 Steel
조립금속 Fabricated metal
비금속 Nonmetal
기타 Others
59 I used the provisional figure from Monthly Energy Statistics, because the figures for the 2018 energy balance have not yet been confirmed.
석유화학(34.9%) 철강(1.0%) 조립금속(8.4%) 비금속(31.5%) 기타(24.2%)
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