Environmental Valuation & Cost-Benefit News

Abstract: Research on climate change has intensified on a global scale as evidence on the costs of global warming continues to accumulate. Confronted with such evidence, the European Union set in late 2006 an ambitious target to reduce its greenhouse gas emissions, by 2020, to 20% below the level of 1990; and invited the rest of the developed economies and the developing world to take part with the Kyoto Protocol. Turkey is the only country that appears in the Annex-I list of the United Nations’ Rio Summit and yet an official target for CO2 emission reductions has still not been established. Thus, as part of its accession negotiations with the EU, Turkey will likely to face significant pressures to introduce its national plan on climate change along with specific emission targets and the associated abatement policies.

Given this motivation, Çağatay Telli, Ebru Voyvoda, and Erinç Yeldan utilize a computable general equilibrium model for Turkey to study the economic impacts of the intended policy scenarios of compliance with the Kyoto Protocol and they report on the general equilibrium effects of various possible environmental abatement policies in Turkey over the period 2006–2020. The model is in the Walrasian tradition with 10 production sectors and a government operating within an open macroeconomy environment. It accommodates flexible production functions, imperfect substitution in trade and open unemployment. We focus on CO2 emissions and distinguish various basic sources of gaseous pollution in the model. Their results suggest that the burden of imposing emission control targets and the implied abatement costs could be quite high, and that there is a need to finance the expanded abatement investments from scarce domestic resources. Policies for environmental abatement via carbon and/or increased energy taxes further suffer from very adverse employment effects. This suggests that a first-best policy would necessarily call for a simultaneous reduction on the existing tax burden on producers elsewhere together with introduction of environmental taxes.

Keywords: Environmental policy; General equilibrium; Climate change; Global warming

by Çağatay Telli 1, Ebru Voyvoda 2, and Erinç Yeldan 3 and 4
1. State Planning Organization, Turkey; Tel.: +90 312 210 2056
2. Department of Economics, Middle East Technical University, Turkey
3. Bilkent University, Turkey
4. University of Massachusetts, Amherst, United States

Journal of Policy Modeling via Elsevier Science Direct www.ScienceDirect.com
Volume 30, Issue 2; March-April, 2008; Pages 321-340
http://dx.doi.org/10.1016/j.jpolmod.2007.03.001