The international debate on the carbon emission reduction for mitigating global warming has made people to find out the rational solution to these conflicting matters: the welfare loss due to carbon emission vs. production decline for the drop of carbon emission. The optimal carbon emission means the corresponding level to the equilibrium carbon emission price which matches the marginal benefit with the marginal cost. This study has been done under the premise that the international trade of carbon emission allowances needs the estimation of optimal carbon emission prices of each country. For this, we proposed the carbon emission pricing model with consideration of both economic factors and environmental factors at the same time and calculated the optimal carbon emission prices according to various inputs in Korea through simulation.
Keywords: carbon emission pricing, global warming, welfare maximization
