Deterrence In Greenwashing: A Theoretical Model Integrating Auditing, Penalties, Transparency And Green Revenue Premium

Greenwashing — firms making institutional environmental claims without underlying genuine environmental practices — has become a leading concern in contemporary environmental regulation. This study presents a theoretical model demonstrating that the deterrence of such behaviour requires four mechanisms — official audit frequency, monetary penalty, institutional transparency infrastructure, and the market premium accruing to genuine green investment — to be analysed simultaneously rather than in isolation. Comparative static analyses indicate that penalty and transparency function as mutually reinforcing complementary instruments and that even high penalties may lose their deterrent effect when transparency infrastructure is weak. As an extension, the EU Carbon Border Adjustment Mechanism (CBAM) is analysed as an independent channel that strengthens deterrence by imposing an additional cost on brown production. Turkey's recent policy moves — the mandatory implementation of Turkish Sustainability Reporting Standards in 2024, the entry into force of Climate Law No. 7552 in 2025, and the EU CBAM compliance process — enable a direct application of the model to the Turkish policy context. The theoretical contribution of the study lies in integrating mechanisms — audit, penalty, institutional transparency and market-based incentive — previously addressed separately in the literature into a single analytical structure; its policy contribution lies in offering this structure as an applicable evaluative framework for Turkey's on going regulatory reform process.