Estimating the economic and climate impacts of nuclear power in Turkey: hypothetical integration and dynamic CGE analysis

Abstract

Turkey is launching a nuclear power plant (NPP) that will go operational in 2023. While it is expected to contribute to secure supply of energy, there are concerns about the environment. We construct a dynamic CGE model to examine the potential economic and environmental impacts of the NPP during the period 2023–2050. For this purpose, we estimate a social accounting matrix by hypothetically integrating a nuclear power sector. The results show that CO2 emissions are reduced by 1.3% by 2050 compared to the baseline without NPP. The reduction in emissions from electricity generation and transport services is decisive in this decline. In addition, while real GDP stays above the baseline in general, it falls below the long-run baseline trend after 2045. We also show that the government’s abatement policies should focus on high-emission sectors, construction, and non-metallic minerals, in particular.

Appendices

Appendix 1: Details of the CGE Model

List of equations

Nested production

$${K}_{D,i}={\beta }_{K1,i}{p}_{Y1,i}{Y}_{1S,i}/r$$

(A.1)

$${L}_{D,i}={\beta }_{L1,i}{p}_{Y1,i}{Y}_{1S,i}/w$$

(A.2)

$${Y}_{1D,i}={\left(\frac{{a}_{3,i}^{\frac{\left({\sigma }_{E}+1\right)}{{\sigma }_{E}}}{\beta }_{Y3,i}{p}_{Y3,i}}{{p}_{Y1,i}}\right)}^{{\sigma }_{E}}{Y}_{3S,i}$$

(A.3)

$${Y}_{1S,i}={a}_{1,i}{K}_{D,i}^{{\beta }_{K1,i}}{L}_{D,i}^{{\beta }_{L1,i}}$$

(A.4)

$${Y}_{2D,ei}={\left(\frac{{a}_{3,i}^{\frac{\left({\sigma }_{E}+1\right)}{{\sigma }_{E}}}{\beta }_{A3,i}{p}_{Y3,i}}{{p}_{Y2,i}}\right)}^{{\sigma }_{E}}{Y}_{3S,i}$$

(A.5)

$${A}_{D,j,i(j\notin e)}={a}_{A,j,i(j\notin e)}{Y}_{S,i}$$

(A.6)

$${A}_{D,j,i(j\in e)}={Y}_{2S,e,i}$$

(A.7)

$${Y}_{3D,i}={a}_{Y,i}{Y}_{S,i}$$

(A.8)

$${Y}_{3S,i}={a}_{3,i}{\left({{\beta }_{Y3,i}Y}_{1D,i}^{\frac{\left({\sigma }_{E}+1\right)}{{\sigma }_{E}}}+{\sum }_{i\epsilon e}{\left({{\beta }_{A3,e,i}{\phi }_{ei}Y}_{2D,e,i}\right)}^{\frac{\left({\sigma }_{E}+1\right)}{{\sigma }_{E}}}\right)}^{\frac{{\sigma }_{E}}{({\sigma }_{E}-1)}}$$

(A.9)

$${A}_{D,j,i}={Y}_{2S,j,i(j\epsilon e)}+{a}_{A,j,i}{Y}_{S,i(i\notin e)}$$

(A.10)

Armington composite good and CET aggregation function

$${A}_{XS,i}={\left(\frac{{a}_{X,i}^{\frac{\left({\eta }_{X}+1\right)}{{\eta }_{X}}}{\beta }_{XA,i}{p}_{Y,i}}{{p}_{XA,i}}\right)}^{-{\eta }_{X}}{Y}_{D,i}$$

(A.11)

$${Y}_{D,i}={a}_{X,i}{\left({\beta }_{X,A,i}{A}_{XS,i}^{\frac{\left({\eta }_{X}+1\right)}{{\eta }_{X}}}+{\beta }_{X,i}{X}_{XS,i}^{\frac{\left({\eta }_{X}+1\right)}{{\eta }_{X}}}\right)}^{{\eta }_{X}+1}$$

(A.12)

$${X}_{S,i}={\left(\frac{{a}_{X,i}^{\frac{\left({\eta }_{X}+1\right)}{{\eta }_{X}}}{\beta }_{X,i}{p}_{Y,i}}{{p}_{X,i}}\right)}^{-{\eta }_{X}}{Y}_{D,i}$$

(A.13)

$${A}_{XD,i}={\left(\frac{{a}_{M,i}^{\frac{\left({\sigma }_{M}-1\right)}{{\sigma }_{M}}}{\beta }_{MAi}{p}_{AYi}}{{p}_{XA,i}}\right)}^{{\sigma }_{M}}{A}_{YS,i}$$

(A.14)

$${A}_{YS,i}={a}_{M,i}{\left({\beta }_{MA,i}{A}_{XD,i}^{\frac{\left({\sigma }_{m}-1\right)}{{\sigma }_{m}}}+{\beta }_{MA,i}{M}_{D,i}^{\frac{\left({\sigma }_{m}-1\right)}{{\sigma }_{m}}}\right)}^{\frac{\left({\sigma }_{m}-1\right)}{{\sigma }_{m}}}$$

(A.15)

$${M}_{Di}={\left(\frac{{a}_{Mi}^{\frac{\left({\sigma }_{M}-1\right)}{{\sigma }_{M}}}{\beta }_{Mi}{p}_{AYi}}{\left(1+{t}_{tMi}\right){p}_{Mi}}\right)}^{{\sigma }_{M}}{A}_{YSi}$$

(A.16)

Prices

$${p}_{G,i}={p}_{A,i}={p}_{I,i}={p}_{C,i}={p}_{AY,i}$$

(A.17)

$${p}_{Y2,e,i}{Y}_{2S,e,i}={p}_{A,i(i\epsilon e)}{A}_{D,e,i}$$

(A.18)

$$\left(1-{t}_{Y,i}\right){p}_{Y,i}{Y}_{S,i}={p}_{Y3,i}{Y}_{3D,i}+{\sum }_{i\notin e}{p}_{A,i}{A}_{D,j,i}$$

(A.19)

$${p}_{CC,i(i\in e)}{C}_{CS,i(i\in e)}={p}_{C,i(i\in e)}{C}_{D,i(i\in e)}$$

(A.20)

$${p}_{M,i}=\varepsilon \bullet {p}_{WM,i}$$

(A.21)

$${p}_{X,i}=\varepsilon \bullet {p}_{WX,i}$$

(A.22)

Household balances

$${C}_{D,i}={\gamma }_{H,i}B/{p}_{CC,i}$$

(A.23)

$$r\bullet K+w\bullet L={I}_{H}$$

(A.24)

$${I}_{H}-\left({S}_{H}+{T}_{D}\right)=B$$

(A.25)

Government balances

$${G}_{D,i}={\gamma }_{G,i}\left(T-{S}_{G}\right)/{p}_{G,i}$$

(A.26)

$${T}_{D}={t}_{tD}{I}_{H}$$

(A.27)

$${T}_{Y,i}={t}_{tY,i}{p}_{Y,i}{Y}_{S,i}$$

(A.28)

$${T}_{M,i}={t}_{tM,i}{p}_{M,i}{M}_{D,i}$$

(A.29)

$$T={T}_{D}+{\sum }_{i}{T}_{Y,i}+{\sum }_{i}{T}_{M,i}$$

(A.30)

Savings and investments

$${I}_{D,i}={\gamma }_{I,i}S/{p}_{I,i}$$

(A.31)

$${S}_{H}={s}_{sH}{I}_{H}$$

(A.32)

$${S}_{G}={s}_{sG}T$$

(A.33)

$$S={S}_{H}+{S}_{G}+{\varepsilon \bullet S}_{F}$$

(A.34)

Market equilibrium conditions

$${A}_{YD,i}={C}_{S,i}+{G}_{S,i}+{I}_{S,i}+{A}_{S,i}$$

(A.35)

$$K={\sum }_{i}{K}_{D,i}$$

(A.36)

$$L={\sum }_{i}{L}_{D,i}$$

(A.37)

$${Y}_{1D,i}={Y}_{1S,i}$$

(A.38)

$${Y}_{2D,e,i}={Y}_{2S,e,i}$$

(A.39)

$${Y}_{3D,i}={Y}_{3S,i}$$

(A.40)

$${A}_{S,i}={\sum }_{j}{A}_{D,i,j}$$

(A.41)

$${Y}_{D,i}={Y}_{S,i}$$

(A.42)

$${A}_{X,i}={A}_{XS,i}$$

(A.43)

$${A}_{YD,i}={A}_{YS,i}$$

(A.44)

$${G}_{D,i}={G}_{S,i}$$

(A.45)

$${I}_{D,i}={I}_{S,i}$$

(A.46)

$${C}_{D,i}={C}_{S,i}$$

(A.47)

$${\sum }_{i}{p}_{WM,i}{M}_{D,i}={\sum }_{i}{p}_{WX,i}{X}_{S,i}+S+F$$

(A.48)

CO₂ emissions

$${CO2}_{hD,e}={a}_{hE,e}{C}_{D,e}$$

(A.49)

$${CO2}_{fD,e,i}={a}_{fE,e,i}{Y}_{2S,e,i}$$

(A.50)

Dynamic module

$${K}_{D,i,t+1}=\left(1-\delta \right){K}_{D,i,t}+{I}_{D,i,t}$$

(A.51)

$${K}_{t+1}=\left(1-\delta \right){K}_{t}+{\sum }_{i}{I}_{D,i,t}$$

(A.52)

$${L}_{t+1}=\left(1+n\right){L}_{t}$$

(A.53)

Glossary

Indices

$i,j$	Goods and production sectors
$e,f$	Energy goods
$\mathrm{1,2},3$	Stage of nested production
$D$	Demand
$S$	Supply

Parameters

${a}_{1,i}$	Production function shift factor, stage 1
${a}_{3,i}$	Production function shift factor, stage 3
${a}_{A,i,j}$	Input–output coefficients
${a}_{fE,i}$	CO2 emissions per unit output
${a}_{hE,e}$	CO2 emissions per unit consumption
${a}_{M,i}$	Shift factor in Armington CES Function
${a}_{X,i}$	Shift factor in CET function
${a}_{Y,i}$	Share of inputs in output in stage 3
$n$	Population growth rate
${s}_{sH}$	Household saving rate
${s}_{sG}$	Government saving rate
${t}_{tD}$	Direct tax rate
${t}_{tM,i}$	Import tariff rate
${t}_{tY,i}$	Indirect tax rates on production
${\beta }_{A3,e,i}$	Distribution parameter in CES function
${\beta }_{K1,i}$	Share of capital in aggregate factor
${\beta }_{L1,i}$	Share of labor in aggregate factor
${\beta }_{M,i}$	Share factor in Armington CES function
${\beta }_{MA,i}$	Share factor in Armington CES function
${\beta }_{X,i}$	Share factor in CET function
${\beta }_{XA,i}$	Share factor in CET function
${\beta }_{Y3,i}$	Distribution parameter in CES function
${\gamma }_{G,i}$	Share of public spending in expenditures
${\gamma }_{I,i}$	Share of investments in expenditures
${\eta }_{X}$	Elasticity of substitution between domestic goods and exports
${\sigma }_{E}$	Elasticity of substitution between energy goods and composite factor
${\sigma }_{M}$	Elasticity of substitution between domestic goods and imports

Variables

${A}_{D,i,j}$	Demand for intermediate inputs
${A}_{S,i,j}$	Supply of intermediate inputs
${A}_{XD,i}$	Demand for domestic goods
${A}_{XS,i}$	Supply of domestic goods
${A}_{YD,i}$	Demand for Armington composite goods
${A}_{YS,i}$	Supply of Armington composite goods
$B$	Household disposable income
${C}_{D,i}$	Demand for consumption
${C}_{S,i}$	Supply of consumption
${C}_{D,i}$	Household consumption demand
${C}_{S,i}$	Supply of household consumption goods
${CO2}_{hD,i}$	CO2 emission by households
${CO2}_{fD,e,i}$	CO2 emission by enterprises
${G}_{D,i}$	Demand for public goods
${G}_{S,i}$	Supply of public goods
${I}_{D,i}$	Demand for investment
${I}_{H}$	Household income
${I}_{S,i}$	Investment supply
${K}_{D,i}$	Capital demand
$K$	Total capital stock
${L}_{D,i}$	Labor demand
$L$	Total labor endowment
${M}_{D,i}$	Import demand
${p}_{A,i}$	Price of intermediate inputs
${p}_{AYi}$	Price of Armington composite goods
${p}_{C,i}$	Consumption prices
${p}_{G,i}$	Price of public goods
${p}_{I,i}$	Price of investment
${p}_{M,i}$	Import price
${p}_{X,i}$	Export price
${p}_{XA,i}$	Price of domestic goods
${p}_{WM,i}$	World prices of imports
${p}_{WX,i}$	World prices of exports
${p}_{Y,i}$	Output prices
${p}_{Y1,i}$	Price of aggregate factor in stage 1
${p}_{Y2,e,i}$	Price of composite factor in stage 2
${p}_{Y3,i}$	Price of composite factor in stage 3
$r$	Rate of return to capital
$S$	Aggregate savings
${S}_{H}$	Household savings
${S}_{G}$	Public savings
$T$	Total tax revenues
${T}_{D}$	Direct taxes
${T}_{M,i}$	Import tariff revenues
${T}_{Y,i}$	Indirect taxes on production
$w$	Wage rate
${X}_{S,i}$	Export supply
${Y}_{D,i}$	Total demand for goods
${Y}_{S,i}$	Total supply of goods
${Y}_{1D,i}$	Aggregate factor supply in stage 1
${Y}_{1S,i}$	Aggregate factor demand in stage 1
${Y}_{2D,i}$	Composite factor demand in stage 2
${Y}_{2S,i}$	Composite factor supply in stage 2
${Y}_{3D,i}$	Composite factor demand in stage 3
${Y}_{3S,i}$	Composite factor supply in stage 3
$\varepsilon$	Exchange rate

Appendix 2: Detailed simulation results

Table A2.1 Macroeconomic results: percentage deviation from the baseline

Table A2.2 Sectoral results: percentage deviation from the baseline