Jang, W. M., Jeong, S.*, Chang, D. Y., Song, H. S., & Suh, S. W. (2024). Implications of carbon leakage: Analysis of domestic vs. international emission ratios in manufacturing companies of major countries. Journal of Climate Change Research, 15(5-1), 653-664. https://doi.org/10.15531/KSCCR.2024.15.5.653

Abstract:

As the burden of achieving carbon neutrality increases, concerns about carbon leakage – where high-emission facilities are relocated abroad or outsourced to evade regulations – are increasing. To counter this, Europe has introduced the Carbon Border Adjustment Mechanism (CBAM), impacting international trade. This study examines potential carbon leakage in South Korea’s manufacturing sector using global corporate carbon emissions data from the Carbon Disclosure Project from 2018 ~ 2022. The analysis covers manufacturing companies from Germany, France, Italy, the UK, the USA, South Korea, Japan, and India, focusing on their direct domestic and foreign emissions (SCOPE 1). Results show that the average proportion of foreign emissions compared to domestic emissions over five years was 31.3% for Germany, 56.0% for France, and 53.8% for Italy, with the UK having an exceptionally large proportion of 106.9%. In South Korea, the proportion was 23.7%, lower than in European countries, while that in India was only 0.1%, indicating that most emissions occur domestically. Japan and the USA had proportions of 49.3% and 39.7%, respectively. Additionally, while European and American companies’ foreign emissions are distributed across various countries, 77.7% of South Korea’s foreign emissions occur in China. This study highlights that advanced European countries have higher foreign emissions levels compared to South Korea or India, primarily in non-EU countries. This indicates potential carbon leakage, providing reference for international regulations to achieve carbon neutrality and to protect domestic industries. South Korean companies’ high dependence on China for foreign emissions suggests the need for strategic planning in future policy developments.