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This paper aims at deriving implications for designing and implementing the climate change legislation in Korea, by comparing several federal legislative bills introduced in the United States Congress for the past few years. About 12 different bills have been investigated and the American Clean Energy and Security Act of 2009 is further analyzed. The paper provides a number of suggestions for introducing the cap-and-trade system in Korea. First, the climate effects and the social acceptability must be addressed in addition to the economic impact in formulating the emission targets, with objective scientific data. International effects as well as domestic effects are to be considered and the target must reflect the fair level of obligations that are expected. Second, climate effects to the emission are slowly manifested, whereas the direct impact due to the climate change is anticipated in the short-run. Therefore, a strong and effective adaptation measures must be included in the climate change legislation. Third, economy-wide regulation in cap-and-trade system is preferred in order to enhance the effectiveness of the market mechanism. Fourth, the emission allowances can be made by the free allowance and by auction. Both of these methods are recommended at the beginning, but gradual phase-out of the free allocation will make the regulated industry to internalize the costs. In the case of the free allocation, the proceeds can be use to provide a safety valve to protect consumer interest and the affected business and to enhance research & development of the clean technologies. Fifth, a variety of market mechanisms, e.g., the offsets, should be utilized. The exact scope and the concrete rules and the operation can be developed through international cooperation.


This paper aims at deriving implications for designing and implementing the climate change legislation in Korea, by comparing several federal legislative bills introduced in the United States Congress for the past few years. About 12 different bills have been investigated and the American Clean Energy and Security Act of 2009 is further analyzed. The paper provides a number of suggestions for introducing the cap-and-trade system in Korea. First, the climate effects and the social acceptability must be addressed in addition to the economic impact in formulating the emission targets, with objective scientific data. International effects as well as domestic effects are to be considered and the target must reflect the fair level of obligations that are expected. Second, climate effects to the emission are slowly manifested, whereas the direct impact due to the climate change is anticipated in the short-run. Therefore, a strong and effective adaptation measures must be included in the climate change legislation. Third, economy-wide regulation in cap-and-trade system is preferred in order to enhance the effectiveness of the market mechanism. Fourth, the emission allowances can be made by the free allowance and by auction. Both of these methods are recommended at the beginning, but gradual phase-out of the free allocation will make the regulated industry to internalize the costs. In the case of the free allocation, the proceeds can be use to provide a safety valve to protect consumer interest and the affected business and to enhance research & development of the clean technologies. Fifth, a variety of market mechanisms, e.g., the offsets, should be utilized. The exact scope and the concrete rules and the operation can be developed through international cooperation.