Alternative policy proposals to reduce greenhouse gas emissions: A multi-sectoral analysis for Turkey

Turkey is a country with lower historical responsibility in greenhouse gas emissions that cause global climate change however her total emission growth rate is quite high. For this reason, use of fossil fuels and industrial processes which are the main factors behind greenhouse gas emissions should be controlled and contribution should be given to international policies implemented for the same purpose. In recent years, the most efficient policies used to reduce emissions are carbon taxing and emission trade. There have been many academic works in the international literature that focus on the issue however especially in Turkey this literature is quite limited and insufficient. This study aims at developing a policy package that is in line with the economic growth targeted in the 10th Development Plan of Turkey and with greenhouse gas emission reduction commitment given in Paris Conference. With this policy package it is aimed to reduce greenhouse gas emissions while minimizing the economic contraction. Policy package suggests carbon taxing as a policy instrument to reduce emissions and this tax is either applied on all industries depending on their emission share or on the most polluting three industries. To complement this, natural gas used in electricity production is partly substituted with bio-fuels as an alternative mode for reaching the policy goals. Carbon tax collected to reach environmental goal is reinjected in the economy to create growth. This injection is made either through households or firms. Findings suggest that carbon tax policy is an efficient instrument to reach the goal however the economic contraction would be lower if the tax is applied on the selected most polluting three industries rather than on all industries depending on their share in total emissions. In addition, energy substitution with bio-fuels would create both environmental and economic positive impacts. The financial resources obtained through carbon taxing would be more efficient in creating economic growth if these are injected to the economy through firms rather than households.