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How to reach an elusive INDC target: macro-economic implications of carbon taxation and emissions trading in Turkey

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  • Baris Karapinar
  • Hasan Dudu
  • Ozge Geyik
  • Aykut Mert Yakut

Abstract

This paper employs a computable general equilibrium model (CGE) to analyse how a carbon tax and/or a national Emissions Trading System (ETS) would affect macroeconomic parameters in Turkey. The modelling work is based on three main policy options for the government by 2030, in the context of Turkey’s mitigation target under its Intended Nationally Determined Contribution (INDC), that is, reducing greenhouse gas (GHG) emissions by up to 21% from its Business as Usual (BAU) scenario in 2030: (i) improving the productivity of renewable energy by 1% per annum, a target already included in the INDC, (ii) introducing a new flat rate tax of 15% per ton of CO2 (of a reference carbon price in world markets) imposed on emissions originating from carbon-intensive sectors, and (iii) introducing a new ETS with caps on emission permits. Our base path scenario projects that GHG emissions in 2030 will be much lower than Turkey’s BAU trajectory of growth from 430 Mt CO2-eq in 2013 to 1.175 Mt CO2-eq by 2030, implying that the government’s commitment is largely redundant. On the other hand, if the official target is assumed to be only a simple reduction percentage in 2030 (by 21%), but based on our more realistic base path, the government’s current renewable energy plans will not be sufficient to reach it. Turkey’s official INDC is based on over-optimistic assumptions of GDP growth and a highly carbon-intensive development pathway;A carbon tax and/or an ETS would be required to reach the 21% reduction target over a realistic base path scenario for 2030;The policy options considered in this paper have some effects on major sectors’ shares in total value-added. Yet the reduction in the shares of agriculture, industry, and transportation does not go beyond 1%, while the service sector seems to benefit from most of the policy options;Overall employment would be affected positively by the renewable energy target, carbon tax, and ETS through the creation of new jobs;Unemployment rates are lower, economic growth is stronger, and households become better off to a larger extent under an ETS than carbon taxation.

Suggested Citation

  • Baris Karapinar & Hasan Dudu & Ozge Geyik & Aykut Mert Yakut, 2020. "How to reach an elusive INDC target: macro-economic implications of carbon taxation and emissions trading in Turkey," Climate Policy, Taylor & Francis Journals, vol. 19(9), pages 1157-1172, July.
    • Handle: RePEc:taf:tcpoxx:v:19:y:2020:i:9:p:1157-1172
    DOI: 10.1080/14693062.2019.1635875
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    Cited by:

    1. Alkan, Ayla & Oğuş-Binatlı, Ayla, 2021. "Is Production or Consumption the Determiner? Sources of Turkey’s CO2 Emissions between 1990-2015 and Policy Implications," MPRA Paper 111635, University Library of Munich, Germany, revised 11 Feb 2021.
    2. Zhanna A. Mingaleva & Yurii V. Starkov, 2020. "The System of Emission Taxation Analyzed: An Institutional Approach," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 25-38, April.
    3. Leonardo Nascimento & Takeshi Kuramochi & Niklas Höhne, 2022. "The G20 emission projections to 2030 improved since the Paris Agreement, but only slightly," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 27(6), pages 1-24, August.
    4. Boqiang Lin & Zhijie Jia, 2020. "Supply control vs. demand control: why is resource tax more effective than carbon tax in reducing emissions?," Palgrave Communications, Palgrave Macmillan, vol. 7(1), pages 1-13, December.

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