The Economic Impact of the Paris Agreement on Sectoral Outputs in Turkiye: An Input-Output Approach

This study analyzes the economic impact of the Paris Agreement on sectoral outputs in Turkiye. All member countries are required to reduce their greenhouse gas emissions by the Agreement according to their responsibilities and capabilities. In this regard, developed countries are subject to absolute emission reduction. Turkiye ratified the Agreement in 2021 as a developing country and started implementation in 2022 as stated in the Nationally Determined Contributions. Regarding implementation of the Agreement, three scenarios are analyzed: the business-as-usual (as a developing country), the absolute emission reduction (as a developed country), and the exit (exiting the Agreement). Emission pathways and reduction amounts for each scenario are estimated accordingly. An input-output model is used based on 2018 tables for 45 sectors. Five policy options are analyzed regarding how to distribute the emission reduction burden among sectors: all sectors according to their shares in 2018 emissions (option 1); the top 9 sectors whose emission coefficients are above average (option 2); the top 6 sectors whose emission multipliers are high (option 3); the top 11 sectors whose emission multipliers are above average (option 4); the top 12 sectors which are the top 11 in option 4 plus the construction sector (option 5). Reducing emissions significantly reduces sectoral output in all scenarios and policy options. However, the impact of the business-as-usual is less than absolute emission reduction. Targeting only a few sectors in emission reduction results in a lower impact. If policy options are sorted by their total cost from smallest to largest, the order would be 3, 2, 4, 5, and 1.