The Changing Dynamics of Turkish Sectors within the Context of Trade in Emissions

Abstract

Although countries have been aware of the climate change risks, no one predicts that such hazardous outcomes will come much earlier. Thus, there have been enormous efforts to mitigate the climate change risks and significant targets to access for dealing with climate change. Not only focusing on the domestic sources of emissions but also focusing on avoiding emissions embodied in trade, developed countries such as the EU and USA impose policies. However, there are some difficulties in terms of holistic point of view and providing a fair framework for a win-win situation for each country. This is especially due to the role of increasing production fragmentation since 1990s within the context of global value chains. That is, trade in value added, which is at the basis of global value chains, manifests itself as trade in emissions when it comes to emissions. We first discuss the emissions issue in a more holistic way in terms of trade in emissions by comparing selected countries with Türkiye and propose policy recommendations for further discussion of climate issues to access more effective and fair solutions. Moreover, our dynamic panel data estimates imply that while inward FDI stocks increase both production and gross exports related emissions. Outward FDI stocks seem to reduce domestic emissions embodied in gross exports, which promotes the argument that developed countries outsource the emissions into developing nations through foreign trade and foreign direct investment.