Marginal GHGs abatement cost in the Republic of Korea’s economy

This paper estimates the Republic of Korea’s marginal abatement cost (MAC) of GHGs emissions for industry, buildings and agriculture sectors by implementing a three-stage linear-logit framework that links disaggregated petroleum-product choices to economy-wide factor substitution (Labor, Capital, Energy). Using annual national data (1991–2020) and an iterative nonlinear SUR estimator, we derive own- and cross-price elasticities and simulate incremental carbon-price scenarios to construct MAC curves. Our results indicate that a carbon price of approximately 50,000 KRW per tCO₂eq (about $36) induces a 19.9% emissions reduction, closely aligning with the sectoral 2030 Nationally Determined Contribution (NDC) target of 20.8%. The findings provide an empirically grounded benchmark for the Republic of Korea’s carbon-pricing policy and highlight areas where complementary measures are required.