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CO2, GDP and RET: An aggregate economic equilibrium analysis for Turkey

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  • Kumbaroglu, Gürkan
  • Karali, Nihan
  • ArIkan, YIldIz
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    Abstract

    There is a worldwide interest in renewable electricity technologies (RETs) due to growing concerns about global warming and climate change. As an EU candidate country whose energy demand increases exponentially, Turkey inevitably shares this common interest on RET. This study, using an aggregate economic equilibrium model, explores the economic costs of different policy measures to mitigate CO2 emissions in Turkey. The model combines energy demands, capital requirements and labor inputs at a constant elasticity of substitution under an economy-wide nested production function. Growing energy demand, triggered by economic growth, is met by increased supply and initiates new capacity additions. Investment into RET is encouraged via the incorporation of (a) endogenous technological learning through which the RET cost declines as a function of cumulative capacity, and (b) a willingness to pay (WTP) function which imposes the WTP of consumers as a lower bound on RET installation. The WTP equation is obtained as a function of consumer income categories, based on data gathered from a pilot survey in which the contingent valuation methodology was employed. The impacts of various emission reduction scenarios on GDP growth and RET diffusion are explored. As expected, RET penetration is accelerated under faster technological learning and higher WTP conditions. It is found that stabilizing CO2 emissions to year 2005 levels causes economic losses amounting to 17% and 23% of GDP in the years 2020 and 2030, respectively.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 36 (2008)
    Issue (Month): 7 (July)
    Pages: 2694-2708

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    Handle: RePEc:eee:enepol:v:36:y:2008:i:7:p:2694-2708

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    Web page: http://www.elsevier.com/locate/enpol

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    Cited by:
    1. Shahbaz, Muhammad & Solarin, Sakiru Adebola & Mahmood, Haider, 2012. "Does Financial Development Reduce CO2 Emissions in Malaysian Economy? A Time Series Analysis," MPRA Paper 40603, University Library of Munich, Germany, revised 10 Aug 2012.
    2. Tamazian, Artur & Bhaskara Rao, B., 2010. "Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies," Energy Economics, Elsevier, Elsevier, vol. 32(1), pages 137-145, January.
    3. Muhammad, Shahbaz & Faridul, Islam & Muhammad Sabihuddin, Butt, 2011. "Financial Development, Energy Consumption and CO2 Emissions: Evidence from ARDL Approach for Pakistan," MPRA Paper 30138, University Library of Munich, Germany, revised 07 Apr 2011.
    4. Muhammad, Shahbaz & Tiwari, Aviral & Muhammad, Nasir, 2011. "The effects of financial development, economic growth, coal consumption and trade openness on environment performance in South Africa," MPRA Paper 32723, University Library of Munich, Germany, revised 10 Aug 2011.
    5. Jalil, Abdul & Feridun, Mete, 2011. "The impact of growth, energy and financial development on the environment in China: A cointegration analysis," Energy Economics, Elsevier, Elsevier, vol. 33(2), pages 284-291, March.
    6. Tamazian, Artur & Chousa, Juan Piñeiro & Vadlamannati, Krishna Chaitanya, 2009. "Does higher economic and financial development lead to environmental degradation: Evidence from BRIC countries," Energy Policy, Elsevier, Elsevier, vol. 37(1), pages 246-253, January.
    7. Celiktas, Melih Soner & Kocar, Gunnur, 2009. "A quadratic helix approach to evaluate the Turkish renewable energies," Energy Policy, Elsevier, Elsevier, vol. 37(11), pages 4959-4965, November.
    8. Shahbaz, Muhammad & Kumar Tiwari, Aviral & Nasir, Muhammad, 2013. "The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa," Energy Policy, Elsevier, Elsevier, vol. 61(C), pages 1452-1459.
    9. Cemil Serhat AKIN, 2014. "The Impact of Foreign Trade, Energy Consumption andIncome on Co2 Emissions," International Journal of Energy Economics and Policy, Econjournals, Econjournals, vol. 4(3), pages 465-475.

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