Factors to enhance reduction technology development through ETS

Environmental regulations can take many forms, from command and control to market-oriented regulations, but their success commonly depends on the active participation of the target. This study surveyed all companies in the Republic of Korea implementing national level emission trading system (ETS) to examine how external conditions and internal perceptions determine companies' response and technology development as against to ETS. It may be the first study to examine the relationships among the objective data (allocation and emissions), characteristics of company (size, employment, sector, and financials) and person in charge of ETS within company (division and position) and companies' perceptions. The results showed that fine allocation design alone does not lead companies to invest in reduction technology. Rather, companies’ perceptions drive the holistic response to ETS and technology investment. In addition, large emitters engaged more actively in ETS, but their holistic response was far from increasing investment in reduction technology. The goals of ETS—cost-effective reduction and green investment—can be best achieved through policy design that takes into account internal awareness, motivation, technology support, and pricing management.