This paper evaluates the practical applicability of induced technologies
utilizing renewable energy (hereafter renewable technologies) and attempts to
find new cost-effective paths to reduce greenhouse gas in the presence of
renewable technologies. For these purposes, we build a fully dynamic CGE
model, in which intertemporal emission trading is possible and renewable
technologies are determined endogenously. This paper shows that renewable
technologies can reduce GDP loss and lower emission trading price
considerably. However, since the spread of renewable technologies will grow
faster over time and, as a result, the future reduction cost will become lower
than the present reduction cost, the national reduction target should be set in
accordance with the diffusion level of renewable technologies. According to
this optimal reduction path, the Korean national greenhouse gas reduction
target should be adjusted down from 30% to 25% for 2020, and up from 50%
to 60% for 2050. Throughout these adjustments of the national reduction
target, we expect smaller GDP loss by 0.3%p a year on the average.