Reducing Carbon Emissions While Boosting Growth: Turkey's Response to the EU's Carbon Border Adjustment Mechanism

Understanding how to design policies to effectively reduce firm-level carbon emissions while minimizing impacts on economic growth is a question of central importance in the battle to mitigate climate change. The European Union is proposing a Carbon Border Adjustment Mechanism (CBAM) that will tax imports to better reflect their carbon content. This project will evaluate three policies that provide firms with training and assistance in obtaining loans with the goal of mitigating the impacts of CBAM on Turkish small and medium enterprises. The first policy focuses on direct carbon mitigation, which is expected to have limited growth spillovers; the second focuses on product innovation to move firms toward greener product mixes; and the third focuses on improving firm efficiency. Comparing outcomes related to both carbon emissions (including leakage), as well as firm-growth allows researchers to assess the tradeoffs between environmental and growth outcomes and explore whether policies can achieve both goals.