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Carbon credit system to raise production costs: report
SEOUL, Feb. 8 (Yonhap) -- South Korea's introduction of a full-fledged carbon credit system could raise production costs of the country's manufacturing sector and hurt economic growth, a state-run think tank said Tuesday.

   The Korea Institute for Industrial Economics and Trade (KIET) said in a report that domestic production costs will likely rise a maximum 1.27 percent if carbon trading is adopted, with the country's gross domestic product contracting 0.58 percent.

   "Due to higher costs, the country's exports may shrink 0.18 percent, with the corresponding slower economic growth to cause employment numbers to fall up to 0.40 percent," it said.

   The institute under the Ministry of Knowledge Economy said while the economy may be hurt overall, steel, cement and petrochemicals could be hard hit.

   In the worst case scenario, the country's cement industry could witness production plunging by 7-9 percent vis-a-vis business as usual, with numbers for steel and petrochemicals to contract 2-3 percent and 0.8-0.9 percent, respectively.

   The KIET report comes as Seoul is pushing to introduce a local carbon trading market in 2013 with the goal of reducing the country's greenhouse gas emission level. The country has said it is firmly committed to an eco-friendly green growth strategy that is vital for sustainable growth although policymakers have stressed the need to fully weigh the fallout from the plan.

   A carbon credit system calls on companies to reduce greenhouse emissions levels or to buy rights to release gases such as carbon dioxide into the atmosphere. Local companies have opposed the adoption of a full-fledged carbon credit scheme, which has the backing of the environment ministry and various civic groups.

   The report, in addition, said that the country's transportation sector will likely be hurt if a carbon trading market is created.

   "There is a need to prepare for fallouts because the regulating carbon exchange will inevitably lead to a slowdown in economic growth," KIET said.