Technological innovation and its impact on carbon emissions: evidence from Korea manufacturing firms participating emission trading scheme

To cope with the ever-increasing environmental regulations, high-emitting countries have established strategies to reduce greenhouse gases. Among these methods, the emission trading scheme (ETS) has been highlighted as a cost-effective reduction tool based on a market mechanism. In order to operate the ETS efficiently and reduce the marginal abatement cost of firms, it is essential to analyse the main factors affecting carbon emissions and design valid policies for industries. This study investigates the potential factors affecting carbon emissions and examines the relationship between innovation activities such as patents and R&D investment and emissions based on firm-level data participating in the Korean Emission Trading Scheme (KETS). It considers that innovation's effect on the environmental performance of firms varies by industries because each industry has a different production process and carbon reduction ability. Thus, in this study, the effects of innovations on greenhouse gases are analysed and compared by industry. The results show that innovation activities have a negative relationship with carbon emissions at the 5% significance level. The comparative analysis between industries indicate that the innovation's effect varies by industry. Process industries are not affected by patents, while in the semiconductor industry, patents play an important role in reducing greenhouse gases.

Automated summary

This study investigates potential factors affecting carbon emissions and finds that innovation activities have a negative relationship with carbon emissions, which varies by industry.