Reducing Carbon Emissions while Boosting Growth: an Experiment with Turkish Manufacturing Firms

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 EU is proposing a Carbon Border Adjustment Mechanism (CBAM) that will tax imports to better reflect their carbon content. This project evaluates three policies that provide firms with training and assistance obtaining loans with the goal of mitigating the impacts of CBAM on Turkish SMEs. The first policy focuses on direct carbon mitigation that we expect 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 us to assess the tradeoffs between environmental and growth outcomes and explore whether policies can achieve both goals.