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Potential Effects of the EU’s Carbon Border Adjustment Mechanism on the Turkish Economy

Author

Listed:
  • Sevil Acar

    (Bogaziçi University Hisar Campus Sariyer Istanbu)

  • Ahmet Atil Asici

    (Istanbul Technical University)

  • A. Erinç Yeldan

    (Kadir Has University)

Abstract

In December 2019, the European Union (EU) announced the European Green Deal (EGD) to create a climate-neutral continent by 2050. Accordingly, the EU Emission Trading System (ETS) will be revised to maintain economic growth against possible losses in competitiveness, leading to “carbon leakage.” The Carbon Border Adjustment (CBA) is one of the mechanisms proposed to tackle the carbon leakage problem; it is an import fee levied by the carbon-taxing region (in this case, the EU) on goods manufactured in non-carbon-taxing countries (in this case, Turkey). The purpose of this paper is to provide a first-order estimate of the potential sectoral impacts of the CBA on the Turkish economy by employing input-output methodology. Our results suggest that the CBA may bring a carbon bill of EUR 1.1-1.8 billion to Turkish exporters in the EU market. The revision of the Intended Nationally Determined Contributions (INDC) target and the ratification of the Paris Climate Agreement at the parliament are two steps that can be taken immediately. Speeding up the ongoing preparatory process of instituting an Emission Trading System (ETS) in Turkey (preferably linked to the ETS), will help minimize economic losses.

Suggested Citation

  • Sevil Acar & Ahmet Atil Asici & A. Erinç Yeldan, 2021. "Potential Effects of the EU’s Carbon Border Adjustment Mechanism on the Turkish Economy," Working Papers 1500, Economic Research Forum, revised 20 Oct 2021.
    • Handle: RePEc:erg:wpaper:1500
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    References listed on IDEAS

    as
    1. Neuhoff,Karsten, 2011. "Climate Policy after Copenhagen," Cambridge Books, Cambridge University Press, number 9781107008939.
    2. Helm, Carsten & Schmidt, Robert C., 2015. "Climate cooperation with technology investments and border carbon adjustment," European Economic Review, Elsevier, vol. 75(C), pages 112-130.
    3. Kat, Bora & Paltsev, Sergey & Yuan, Mei, 2018. "Turkish energy sector development and the Paris Agreement goals: A CGE model assessment," Energy Policy, Elsevier, vol. 122(C), pages 84-96.
    4. Acar, Sevil & Yeldan, A. Erinc, 2016. "Environmental impacts of coal subsidies in Turkey: A general equilibrium analysis," Energy Policy, Elsevier, vol. 90(C), pages 1-15.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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