Assessing the effectiveness of the ‘Green Economic Stimulus’ in South Korea: Evidence from the energy sector

The purpose of this paper is to provide an ex-post evaluation of the effectiveness of the South Korean Green New Deal (GND) as an instrument to deliver both an economic recovery and improved environmental performance. We use the energy sector as the main scope for our analysis when measured against climate-related indicators (e.g. CO2 emissions, energy intensity, share of renewable energy in supply mix) adopted by the South Korean government as part of a broader commitment to green growth. The research involves complimentary methods to assess the economic and environmental effectiveness of the GND at the macro-level; including the so-called ‘Three T test’, a time series variability analysis and an econometric assessment. From a pure economic perspective, results suggest that the GND has been relatively successful as traditional fiscal stimulus. However, the GND seems ineffective as an instrument of environmental policy; at least in the short-term. In fact, and from an historical point of view, the econometric assessment confirms that the level of CO2 emissions has been largely determined by (the rate of) economic growth. On the short-term, the level of environmental ineffectiveness of the GND can be explained by numerous factors; including the lack of complementary pricing reforms, insufficient renewable energy uptake, and improvements in energy intensity incapable of offsetting the negative effects of economic growth. The research findings need to be tempered by limitations associated with the analysis, notably related to causality. At all events, it is worth considering the role that the GND may have played in providing impetus for long-term action to enhance green growth policies in the energy sector, such as the implementation of the Renewable Energy Portfolio Standard in 2012 or the Emission Trading Scheme in 2015.