In empirically assessing the national target in reducing greenhouse gases announced by the government, this study uses a dynamic model which new technologies are endogenously determined as illustrated by the introduction of renewable energies in the electric power sector and future cars in the transportation sector. Since the actual amount of greenhouse gases which we need to curtail depends on how far the Korean economy has advanced, two types of scenarios where the economy achieves low or high growth are provided to assess the national reduction target.

Our analysis results predict that the absence of a new policy so called ‘Low Carbon & Green Growth’ which will present new opportunities to achieve economic growth and address climate change can cause a 1.49% loss of 2020 GDP in case of the low-growth scenario and 1.83% loss of that in case of the high-growth scenario. As it is required to reach the higher national goal of reducing 50% emissions compared to the BaU(Business as Usual) in 2050, the GDP loss can soar to 3.69% and to 4.32% for scenarios of low growth and high growth respectively when new technologies are not adopted. Therefore, the average annual GDP losses during the period between 2020 and 2050 are projected at 2.76% and 3.35% respectively for the two cases. In contrast, when the ‘Low Carbon & Green Growth’ policy facilitates a vigorous introduction of new technologies, the loss of GDP in 2020 can be significantly lowered to 1.16% for low-growth scenario and 1.55% for high-growth one. As time goes by, there will be expansion in the introduction of new technologies, which accelerates the reduction of GDP loss. In 2050, GDP loss is projected at 0.51% and 0.74% for scenarios of low growth and high growth respectively, resulting in average annual losses of 0.77% and 0.99%. However, with all the active introduction of new technologies, the expected GDP loss by 2050 is likely to hinder the government from achieving two intended goals of improving the environment and growing the economy at the same time.

To minimize the costs of reducing greenhouse gases, we need to creating a longer-term view in readjusting the national target of cutting back on greenhouse gas emission, taking the characteristics and the cost structure of greenhouse gases into consideration. once greenhouse gases occur in the atmosphere, they stay long and affect the whole globe. Therefore, greenhouse gas reduction for a specific year or a nation(especially a small country) brings limited benefits. on the other hand, short-term abatement costs are enormous because immediately reducing greenhouse gas emission is usually accompanied by the fall in production, while various factors including the development of new technologies bring down mid- to long-term abatement costs. Consequently, this study indicates that it is inefficient to target a specific year in setting a goal for reducing greenhouse gas emissions. Moreover, the research demonstrates that the loss in GDP can be significantly reduced if disparate national targets for reducing greenhouse gases are set at each time in consideration of different conditions for minimizing costs. According to our research results, it is recommended to set the 2020 reduction rate at 25%, 5%p lower than the original national target and to move to reduction rates higher than the national target by 6∼10%p in 2050(56∼60%) based on cost-effectiveness. Our study shows that redistributing points of time alone can mitigate the annual loss in GDP by about a 0.3%p.