A Study on End-of-pipe Costs in the Manufacturing Sector in a Developing Economy : A Korean Case

Abstract

The relationship between industrial development and the environment still seems to be negative in a developing economy. Important features in the relationship are the generation of pollutants and relerant control activities. The reactive control activities are related to regulations and executive policies followed by burdensome costs of private manufacturing firms. The firms consequently try to lessen the burden and adopt an environment-friendly strategy, which is still normative in a developing region. A simple system dynamics model is applied for understanding the underlying patterns of feedback and dynamics regarding such activities in Korea.

Simulation results suggest that stringent regulations amplify the clean-up cost and the demand/price in the pollution-control sector, affect the level of the pollution-control technology and as a result, bring the burden of the cost of end-of-pipe control activities to the manufacturing sector in a short term, which lead to the development and diffusion of clean technology in the manufacturing sector and ultimately lead to an overshoot and collapse structure of the pollution-control sector. Thus the government needs to provide adequate industrial policies such as technology-push strategies for the pollution-control sector as well as the manufacturing sector.