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Climate Risk and Business in Seoul: An Application of the CGE Model

In Chang HwangㆍChang-Hun KimㆍKoUn KimㆍJong-Rak BaekㆍYoon-Hye Yi

We investigate the effect of climate change on business in Seoul. A computable general equilibrium (CGE) model was developed and applied to economic sectors in Seoul. Corporate faces double risks from climate change. Climate risks are comprised of a physical risk from climate change and a regulatory risk from carbon pricing. In this report, physical impacts were constructed from a variety of integrated assessment models (IAMs) such as GCAM, MASSAGE, and REMIND. Policy scenarios are based on carbon tax pathways derived from IAMs such as DICE and its variant models. Business in Seoul is expected to lose 3.8 percent of gross business outputs from physical damage and carbon pricing in 2030 if the current level of carbon tax rates (50 dollars per tonne of carbon) is maintained. If the carbon tax rates increase to the consensus level required for carbon neutrality (250 dollars per tonne of carbon in 2030), outputs losses of business sectors in Seoul increase to 16.9 percent. Carbon intensive sectors such as power supply, iron and steel are most vulnerable to climate risks, among others. In addition, this report investigates climate actions of business sectors in Seoul from the CDP database. Roles and responsibilities of government, corporate, researchers, and the general public are discussed.