Turkey’s Key Strategy for Green Economy Transformation: Carbon Tax

Climate change is one of the most fundamental problems of our age that concerns all humankind. Mainly it is caused by the increase in carbon and greenhouse gas emissions in cities and the deterioration of the natural balance. Industrialization, one of the leading causes of environmental pollution, started with the first Industrial Revolution, rapid population growth in cities, unconscious consumption of natural resources, and increased carbon and greenhouse gas emissions. The increase in greenhouse gas emissions is due to the excessive use of fossil fuels and improper land use, leading to deforestation (URL 1). Therefore, the common mission for humankind is to protect the environment to improve our quality of life and leave a livable Earth for future generations.

The increase in greenhouse gases in the atmosphere causes a significant rise in temperature in the environment. While carbon dioxide and particulates accumulate in the air and threaten human and environmental health, they cause an increase in air pollution. It reduces soil fertility, and in the near future, it will cause food shortages. The sustainability of resources is the crucial strategy to achieve healthy economic growth. Since there is no place like Earth in the whole galaxy for us to live and prosper, we have to meet on common ground and act together.

The first global conference specifically focused on the environment was the United Nations Conference on the Human Environment, also known as the Stockholm Conference, held in Stockholm in 1972. This conference led to the development of international environmental law. Environmental problems that occupied the global plan soon became the start of the environmental movement and a more holistic approach. In the report “Our Common Future” published by the World Commission on Environment and Development in 1987, the definition of sustainable development policy in the fight against environmental problems was defined(Bali & Yaylı, 2019). In the report, in the face of increasingly severe environmental issues, establishing a vital bridge between ecological development and economic development and ensuring that growth is “sustainable” has been accepted as the way out for humanity (Bozlağan, 2005). The Kyoto Protocol, signed in 1997, and the Paris Agreement (COP21), signed in 2015, are international agreements that set targets for reducing greenhouse gas emissions in combating global warming and climate change (Bali & Yaylı, 2019).

The Paris Agreement entered into force on 4 November 2016 as a result of meeting the requirement that at least 55 parties ratify the agreement, which as of 5 October 2016, accounts for 55% of global greenhouse gas emissions. In the Kyoto Protocol, which remains valid until 2020, developed countries have taken on the responsibility of reducing greenhouse gas emissions to a large extent, while in the Paris Agreement, which forms the basis of the policies to be adopted for the post-2020 period, this responsibility is not only assigned to developed countries but to all countries that are a party of the agreement. The agreement’s long-term goal is to keep the global temperature rise as low as 2°C compared to the pre-industrial era. This target requires reducing the use of fossil fuels (oil, coal) and turning to renewable energy (URL 2).

Wind Turbines from Renewable Energy Types (URL 3)

With many countries still using fossil fuel energy systems instead of renewable energy, carbon dioxide in the atmosphere continues to increase significantly. As a result, while the atmosphere gets warmer; Climates change every year, many species are in danger of extinction, and many environmental problems arise, such as pollution of the oceans and waters. On 11 December 2019, the European Union announced the European Green Consensus, which aims to be the first continent with zero net greenhouse gas emissions by 2050. The Green Deal is not a climate policy; It was also designed as an economic transformation program. It aims to create job opportunities and increase the quality of life while reducing emissions (URL 4).

Preventing the rise of greenhouse gas emissions is not a task that only Europe is responsible for. Climate change and environmental problems are global. It uses its reach, expertise, and financial resources to mobilize its neighbors and stakeholders in the EU to join it sustainably (URL 4). It is seen that the “Border Carbon Adjustment Mechanism (BCAM) ” is aimed to be put into practice in order to protect the competitiveness of Europe and to prevent the shift of production and investments to countries with less emission reduction targets than the EU, in the face of the cost that the policies targeted with the European Green Deal will create on the European industry (URL 5). The BCAM is designed to be a parallel system to the EU Emissions Trading System (ETS).

According to the Fit For 55 package’s criteria prepared within the Green Deal framework, the EU will set a carbon emission limit value for each product it imports. For products exceeding these determined limit values, no additional customs duty will be applied at an average of 55–60 Euros for each 1 ton of excess carbon emission (URL 6). With this application, while encouraging the use of renewable energy sources instead of fossil fuels; It is aimed to deter fossil fuel use by levying a carbon tax on those who still use fossil fuels, with the polluter pays logic. Furthermore, the EU now requires candidate countries to “ratify and effectively implement” the Paris Agreement for trade agreements with other countries (URL 7). Turkey signed this agreement in 2016 and became the last G20 country to ratify the Paris Climate Agreement on October 7, 2021.

According to the European Environment Agency (2020) data, when the greenhouse gas emissions of the EU member countries are analyzed, the ranking of the top three countries in terms of the share of the EU in total greenhouse gas emissions in 2018 in Germany, France, and Italy. Turkey’s total greenhouse gas emissions in 2018 have a share of 13.7% in the EU-27 with 533 million tons (Şahin & Önder, 2021). It can be seen from here that Turkey’s greenhouse gas emission level has a high share compared to the EU. According to the data presented by TURKSTAT (2020), fuel combustion and fugitive emissions are at a very high level since energy-related emissions in Turkey are mainly based on fuel combustion. This is followed by the transport and storage of carbon dioxide (Şahin & Önder, 2021). China and America are the countries that emit the most carbon (The World Bank, 2021). While these countries and Europe are creating their carbon tax systems to reduce carbon emissions; There is no direct carbon tax application in our country’s field of carbon tax. At the end of last year, Turkey finalized the draft legal and institutional framework for a pilot ETS for the energy and industrial sector (The World Bank, 2021).

Carbon Pricing Map, 2021 (The World Bank, 2021)

Turkey has achieved close integration with the EU with the Customs Union, which has been in effect for more than 25 years and has earned a trading volume of 140 billion dollars as of 2020. Countries that integrate with the Customs Union collaborate against other countries. While the integration member countries go a division of labor among themselves, they liberalize trade among themselves, set up trade barriers against non-union countries, and bear the positive or negative consequences of these practices (Hobikoğlu, 2007). The EU has an essential share in Turkey’s exports. Therefore, Turkey meticulously fulfills its obligations arising from the Customs Union. With the European Green Consensus, the EU has announced that it will adopt a new growth strategy that requires the transformation of its industry and will reshape all its policies on the axis of climate change. Due to the Customs Union in Turkey, it is obliged to fulfill the necessary transformations.

In this regard, Turkey has prepared a “Green Deal Action Plan” in 2021. The action plan includes a total of 32 targets and 81 actions under 9 main headings. It aims to reduce greenhouse gas emissions in priority manufacturing industry sectors that may be subject to border carbon regulation, implementing the carbon pricing mechanism and developing a system for monitoring greenhouse gas emissions. Strengthening the technological infrastructure for green transformation; It aims to complete the studies for implementing Green OIZs and Green Industrial Zones. It will reduce the carbon footprint of the products produced in the country, and will also ensure that companies’ place in the value chains is strengthened, considering the increasing number of international companies’ commitments to de-carbonize their value chains (T.R. Ministry of Commerce, 2021).

Turkey’s integration into the European Green Deal has pretty critical in terms of economic advantages. If this integration is not provided, Turkish companies will lose their competitiveness or cannot realize this green transformation and have to pay carbon tax, if they reach financing more expensive, this will increase the companies’ costs and reduce their competitiveness. Therefore, this situation will most likely be reflected in the prices of the products or services they produce. The Mediterranean basin, where Turkey is located, is considered one of the most sensitive regions to the adverse effects of climate change. Turkey has begun to be affected by the negative aspects of global warming, significantly decreasing water resources and desertification and ecological deterioration due to these reasons (URL 8). Forest fires in Antalya and Muğla in August and the fight against floods in Kastomonu, Bartın, and Sinop showed that Turkey is not ready for the climate crisis.

Fire Area, Manavgat, Antalya 2021 (URL 9)

In 2019, a report is prepared for Turkey in OECD’s Environmental Performance Reviews. It examines Turkey’s environmental performance since 2008. Turkey’s economy has been growing rapidly since 2008, but this growth points to the growth of a highly carbon-intensive economy based on fossil fuels. As a result, the rapid increase in greenhouse gas emissions highlights the poor air quality in large cities and industrialized areas and the inadequacy of recovery and recycling of municipal solid waste. As a result, it is claimed that Turkey is exposed to the effects of climate change (OECD, 2019).

Turkey’s Use of Energy Resources Over the Years (OECD, 2019)

Largely as a result of high taxes on oil and diesel gasoline, Turkey has among the highest rates of environmental taxes as a percentage of GDP (gross domestic product) in the OECD. The vehicle taxation system provides environmental incentives but often directs consumers towards older, used vehicles with higher emissions. Tax exemptions on petroleum products and coal benefit poor families because most environmentally harmful subsidies go toward heating. Turkey must remove tax exemptions for fossil fuel consumption as soon as possible and switch to cleaner alternatives (OECD, 2019). The fact that the share of environmental taxes in GDP is high in Turkey compared to the European Union will not change the conclusion that the main purpose of these taxes is financial rather than ecological. At this point, the first thing to do is to put a new tax application on the country’s agenda without being financially focused.

As a percentage of GDP as of 2016, environmental tax revenues (OECD, 2019)

Turkey’s increase in greenhouse gas (GHG) emissions (+49%) during 2005–16 was the highest in the OECD. However, it remains the only OECD member country not committing to climate mitigation for 2020. Floods and droughts, which have increased significantly in the country in recent years, are evidence of climate change. The most crucial step to be taken to prevent climate change is to avoid greenhouse gas emissions. States have turned to various economic tools at the point of emission reduction. One of these financial tools is the carbon tax. As of 2019, carbon taxes are implemented or planned in 25 countries. 46 countries put some kind of price on carbon through carbon taxes or emissions trading schemes (URL 10). The absence of a direct carbon taxation system in Turkey causes the environmental quality to deteriorate. It shows that if Turkey carries out an active climate policy, its national income will increase by 7 percent (URL 11).

The 2020 Environmental Performance Index Report compares the environmental performance of 180 countries. Denmark has the best environmental performance with 82.5 points; Turkey is in the 99th place with 42.6 points. It is also the country with the lowest ecological performance among Eastern European countries. While Turkey’s environmental health score was 71.56 in 2018; It decreased to 51.3 in 2020. In terms of ecosystem vitality, it ranks 136 with 36.9 points. The fact that the environment is so low in the country surrounded by seas on three sides and with high biodiversity clearly shows that Turkey should focus on policies to reduce its carbon emission intensity and improve the ecosystem. In addition, it is noteworthy that European Union member countries are at the top of the index and 5 of the 10 best-performing countries that apply carbon tax (Yale University, 2020).

2020 EPI rank, score, and regional rank (REG) for 180 countries (Yale University, 2020)

Looking at the sustainable development performances of countries in the 2020 “Sustainable Development Index and Dashboards” report, it is seen that Switzerland ranks 1st with 84.7 points. While it is clear that other countries that apply carbon tax, as in the 2020 Environmental Performance Index Report, are at the top of the index, the countries that are at the top of the index are also European Union member countries. Turkey is in 70th place with 70.3 points. The report stated that Turkey’s strategies and policies for the prevention of global warming were insufficient (Cambridge University, 2020).

While Turkey is ahead of many countries in the world economically, it has failed in environmental performance. As a result of the reports examined, it can be stated that Turkey’s sustainable development performance is not at the desired level, and studies on sustainable development in both environmental and economic terms should be emphasized. Fulfilling the necessary obligations under the Paris Agreement as soon as possible is essential for economic growth, sustainability of our natural resources, and environmental health. If we cannot adapt to the European Green Deal, it will cause us to lose competition in foreign trade and many economic and social problems with the price increase in products. Increasing floods, fires, and droughts in our country reveal that we are incomplete in the fight against climate change. Necessary policies should be formed and implemented as soon as possible to prevent the increase of greenhouse gas, one of Turkey’s most significant environmental problems. Carbon tax, one of these economic tools, can have the desired effect of limiting greenhouse gas emissions and protecting natural resources.

References

Bali, S., & Yaylı, G. (2019). Applicability of Carbon Tax in Turkey. Third Sector Social Economic Review, 54(1), 302–319.

Bozlağan, R. (2005). Historical Background Of The İdea Of ​​Sustainable Development. Journal of Social Policy Conferences №50, 1011–1028.

Cambridge University. (2020). Sustainable Development Report 2020.

Hobikoğlu, E. H. (2007). Economic Effects of Customs Unions and Turkish Economy: Reflections of Customs Union. Journal of Social Sciences, (1), 65–82.

OECD. (2019). OECD Environmental Performance Reviews Turkey 2019.

Şahin, G., & Önder, H. G. (2021). Waste Management, Greenhouse Gas Emıssıons And Turkey: An Assessment In The Framework Of The European Green Deal. Akademik Sosyal Araştırmalar Dergisi, 112, 194–216.

T.R. Ministry of Commerce. (2021). Green Deal Action Plan 2021.

The World Bank. (2021). Carbon Pricing 2021.

Yale University. (2020). Environmental Performance İndex 2020. EPİ.

URL 1: https://www.wwf.org.tr/ne_yapiyoruz/iklim_degisikligi_ve_enerji/iklim_degisikligi/ WWF, Climate Change. 2 September 2021.

URL 2: https://iklim.csb.gov.tr/paris-anlasmasi-i-98587 T.C. Environment And Urban Ministry, Paris Agreement. 1 September 2021.

URL 3: https://www.quickanddirtytips.com/education/science/how-does-wind-energy-work?page=1 Quick and Dirty Tips, How Does Wind Energy Work?. 5 September 2021.

URL 4: https://ec.europa.eu/commission/presscorner/detail/en/IP_21_3541 European Commission, European Green Deal: Commission Proposes Transformation of EU Economy And Society To Meet Climate Ambitions. 2 September 2021.

URL 5https://www.yesildusunce.org/avrupa-yesil-mutabakati-turkce-cevirisi-yayinlandi/ Green Thought, European Green Deal. 28 August 2021.

URL 6: https://www.indyturk.com/node/388406/t%C3%BCrki%CC%87yeden-sesler/fit-55 İndependent Turkish, Fit For 55. 28 August 2021.

URL 7: http://www.rekabetregulasyon.com/avrupa-birligi-yesil-mutabakati-ve-ihracatimiza-etkileri/#_ftn5 Competition and Regulation, European Union Green Deal and Its Effects on Our Exports. 27 Auguts 2021.

URL 8: https://www.mfa.gov.tr/paris-anlasmasi.tr.mfa T.R. Ministry of Foreign Affairs, Paris Agreement. 28 August 2021.

URL 9: https://www.gazetevatan.com/manavgat-ta-yanginda-olen-var-mi–1404456-gundem/ Vatan Newspaper, Has anyone died in the fire in Manavgat?. 5 September 2021.

URL 10: https://tr.wikipedia.org/wiki/Karbon_vergisi Wikipedia, Carbonixation Tax. 27 August 2021.

URL 11: https://fikirturu.com/toplum/paris-iklim-anlasmasi-her-seyi-degistirecek-turkiyenin-yesil-donusumune-kararli-adim/ Fikirturu, Paris Climate Agreement Will Change Everything: A Decisive Step Towards Turkey’s Green Transformation. 25 October 2021.