Conference Paper
The Impact of the EU’s Emissions Trading System on 3rd Countries in the Middle East and North Africa (MENA)
No.
ERF32AC_234
Publisher
ERF
Date
May, 2026
Topic
O3. Technological Change, Research and Development, Intellectual Property Rights
Q4. Energy
Q5. Environmental Economics
F. International Economics
Could the European Union’s Emission Trading System (EU’s ETS) have both negative (carbon leakage) and positive (technology spillover) impacts on a 3rd country such as Türkiye or Egypt? The primary objective with this paper is first to calibrate a structural equation model (SEM) with the World Bank’s Enterprise Survey data for Türkiye to answer this question and then apply it to all relevant samples, where the same data is available for the Middle East and North Africa (MENA) region. The theoretical foundation of the model is DiMaggio and Powell’s seminal work on institutional isomorphism and translations. The results suggest a SEM at three levels: institutions (formal, informal and self-management), actions (technology adoption) and outcomes (energy intensity). The calibrated SEM is then applied to test for the 3rd country impact of the ETS on Türkiye and other MENA economies: Egypt, Lebanon, Morrocco and Tunisia. The main results are that the ETS is best modelled as a pure external economy (positive or negative spillover), such as through specialization effects driven by carbon leakage and technologies embedded in imported machinery from the Union into the 3rd country, and, that on balance, it is found that the ETS has a positive spillover effect on Turkish and Moroccan firms, whereas the same effect is negative for Egypt and Tunisia (for Lebanon the results are inconclusive). These contrasting results are consistent with Egypt and Tunisia being net-exporters of fossil fuels and Morocco and Türkiye being net-importers.