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.

• 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.

     

Achievability of the Paris Agreement targets in the EU: demand-side reduction potentials in a carbon budget perspective

Limiting global warming to ‘well below’ 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase even further to 1.5°C is an integral part of the 2015 Paris Agreement. To achieve these aims, cumulative global carbon emissions after 2016 should not exceed 940 – 390?Gt of CO₂ (for the 2°C target) and 167 – ?48?Gt of CO₂ (for the 1.5°C target) by the end of the century. This paper analyses the EU’s cumulative carbon emissions in different models and scenarios (global models, EU-focused models and national carbon mitigation scenarios). Due to the higher reductions in energy use and carbon intensity of the end-use sectors in the national scenarios, we identify an additional mitigation potential of 26–37 Gt cumulative CO₂ emissions up to 2050 compared to what is currently included in global or EU scenarios. These additional reductions could help to both reduce the need for carbon dioxide removals and bring cumulative emissions in global and EU scenarios in line with a fairness-based domestic EU budget for a 2°C target, while still remaining way above the budget for 1.5°C.

Key policy insights

• Models used for policy advice such as global integrated assessment models or EU models fail to consider certain mitigation potential available at the level of sectors.

• Global and EU models assume significant levels of CO₂ emission reductions from carbon capture and storage to reach the 1.5°C target but also to reach the 2°C target.

• Global and EU model scenarios are not compatible with a fair domestic EU share in the global carbon budget either for 2°C or for 1.5°C.

• Integrating additional sectoral mitigation potential from detailed national models can help bring down cumulative emissions in global and EU models to a level comparable to a fairness-based domestic EU share compatible with the 2°C target, but not the 1.5°C aspiration.