자원·환경경제연구 ISSN:1229-9146(Print) Environmental and Resource Economics Review

The volatility of emission allowance markets represents investment risk and plays a crucial role in participants’ allowance holdings, trading behavior, and related greenhouse gas reduction investments. This study employs a GARCH-DID model to examine whether the introduction of the market maker system—a new market stabilization measure implemented during the third commitment period of the Korean Emissions Trading Scheme (K-ETS)—has contributed to a reduction in allowance price volatility. To this end, this study constructed a daily panel dataset of allowance prices from the Korean Emissions Trading Scheme (K-ETS) and the European Union Emissions Trading System (EU ETS), designating the price of Korea’s allocated allowances (KAU) as the treatment group and the price of the European Union’s allocated allowances (EUA) as the control group.The study first estimated time-varying conditional variances using the GARCH model, and these extracted conditional variances were used as the dependent variable representing price volatility in the subsequent DID regression analysis. Based on the estimation results of the combined GARCH–DID model, it was found that during the third commitment period (2021–2025) of Korea’s Emissions Trading Scheme, the volatility of allowance prices increased compared to that of the European Union’s allowance prices over the same period, and also rose relative to Korea’s first and second commitment periods.