What is in the Emissions Trading System (ETS) for Turkey? -A Model of Green Behaviour with Enterprise Survey (Green Module+) Data for Turkey

The EU’s Emission Trading System (ETS) has been moving forward fast with the ensuing of the current climate crisis. The ETS is now viewed as one of the most important instruments towards achieving behavioural change with European firms operating inside and outside the Union. The current phasing out of free allocations, and with it the introduction of the Carbon Border Adjustment Mechanism (CBAM), represents an important momentum in trade policy changes underway. The present paper has two objectives: to calibrate a general SEM model with which the ETS can be be studied quantitively and using the World Bank's Enterprise Survey datasets (with the Green Module added). A secondary objective is to investigate two working hypothesis about the impact the ETS has on Turkish firms. In this preliminary version (extended abstract revised after the conference) of the final paper it is shown with the SEM model that a system such as the ETS can have important impacts beyond the obvious regulatory ones such as instilling cultural change in European organisations through the implementation of self-management systems. The testing of specific hypothesis also show that despite the concern about carbon leakage, the ETS has potentially led to a lowering of energy intensities in Turkish firms with 10% relative to non-regulated industries and sectors. Most likely this impact occurs as a trade policy spillover through imports of machinery and equipment from the Union that are more energy efficient.