As governments accelerate the push toward carbon neutrality―while advancing strategies for emerging industries, responding to tighter protectionism, and adapting to shifting supply chains―pressures to build domestic industrial capacity, strengthen energy security, and secure technological autonomy have intensified. Although support for renewables and low-carbon processes is expanding, preferential measures for domestic producers risk distorting price signals, weakening allocative efficiency, and increasing exposure to trade disputes. This report examines how such industrial support interacts with energy-market design and assesses the implications for market participation, competitive dynamics, and overall efficiency.

We develop an asymmetric auction model that reflects cost and capability gaps between domestic and foreign firms and incorporates a lower-bound constraint on domestic firms’ ex-ante winning probability. Within this setting, we compare three instruments: (i) horizontal measures that reduce entry costs (e.g., grid and other infrastructure investment, market and regulatory reform); (ii) conditional, flat subsidies paid when a domestic bidder wins; and (iii) market-based, multi-dimensional (scoring) auctions that award non-price premiums for domestic content. When entry costs are significant, conditional subsidies tend to dampen participation less than scoring-based linkage and can deliver higher allocative efficiency. Combining horizontal and vertical tools helps meet domestic-content objectives while limiting distortions and widening competition relative to reliance on vertical measures alone.

Building on these results, the report recommends: defining measurable short- and long-term objectives; prioritising sectors with meaningful yet bridgeable capability gaps; translating non-price scores into “equivalent subsidies” for transparent calibration; embedding regular evaluation and sunset provisions; and continuously ensuring consistency with international trade disciplines.

Abstract
Preface
Summary (Korean)

Chapter 1. Introduction

Chapter 2. Current Status and Changes in Support Policies for Industry Fostering
　Section 1. Definition and Purpose of Industrial Support Policies
　Section 2. Application Methods and Case Studies of Support Policies
　Section 3. Evaluation of Energy Industry Support Policies
　Section 4. Korea's Energy Industry Fostering Policies

Chapter 3. Model Analysis
　Section 1. Related Literature
　Section 2. The Model
　Section 3. Equilibrium Analysis

Chapter 4. Policy Implications
　Section 1. Policy Objectives
　Section 2. Selection of Support Targets and Setting of Support Levels
　Section 3. Support Methods and Policies
　Section 4. Alignment with International Trade Norms
　Section 5. Establishment of Evaluation Framework and Possibility of Modification

Chapter 5. Conclusion

References

Appendix