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

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.