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

Sevil Acar, Ahmet Asici () and Erinc Yeldan

No 1500, Working Papers from Economic Research Forum

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.

Pages: 25
Date: 2021-10-20, Revised 2021-10-20
New Economics Papers: this item is included in nep-ara, nep-ene, nep-env and nep-int
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Published by The Economic Research Forum (ERF)

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Journal Article: Potential effects of the EU’s carbon border adjustment mechanism on the Turkish economy (2022)
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