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 of humankind. Mainly it is caused by the increase in carbon and greenhouse gas emissions in cities and deterioration of natural balance. Industrialization, one of the main causes of environmental pollution, started with the first Industrial Revolution and rapid population growth in cities, unconscious consumption of natural resources, and an increase in carbon and greenhouse gas emissions. Increase in greenhouse gas emissions is due to the excessive use of fossil fuels as well as improper land use, which leads especially to deforestation (URL 1). The common mission for all of humankind is to protect the environment both to improve our own quality of life and to leave a livable Earth for future generations.
The increase in greenhouse gases in the atmosphere causes a significant rise of temperature in the environment. While carbon dioxide and particulates accumulated in the air and threaten human and environmental health, they cause an increase in air pollution. It reduces the fertility of the soil and in the near future it will cause food shortages. Sustainability of resources are the key strategy to achieve a 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 a common ground and act together.
The first global conference specifically focused on 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 the international environmental law. Environmental problems that occupied the international agenda soon turned into 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 problems, establishing a vital bridge between environmental development and economic development and ensuring that development 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 the process of 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 long-term goal of the Agreement 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).
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 as a climate policy, It was also designed as an economic transformation program. It is aimed 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 of. 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 in a sustainable way (URL 4). It is seen that the “Border Carbon Adjustmen 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 criteria of the Fit For 55 package prepared within the framework of the Green Deal, 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 carbon tax from those who still use fossil fuels, with the polluter pays logic. 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 the total greenhouse gas emissions in 2018 is 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), emissions from 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 own carbon tax systems to reduce carbon emissions; There is no direct carbon tax application in the field of carbon tax in our country. 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).
Turkey has achieved a close integration with the EU with the Customs Union, which has been in effect for more than 25 years, and has achieved a trade volume of 140 billion dollars as of 2020. Countries that are in integration with the Customs Union act jointly against other countries. While the integration member countries go to 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 important 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 is aimed to reduce greenhouse gas emissions in priority manufacturing industry sectors that may be subject to border carbon regulation, to implement the carbon pricing mechanism and to develop a system for monitoring greenhouse gas emissions. By strengthening the technological infrastructure for green transformation; It is aimed to complete the studies for the implementation of 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 have quite critical in terms of economical advantages. If this integration is not provided; If Turkish companies lose their competitiveness or cannot realize this green transformation and have to pay carbon tax, if they reach financing more expensive, this will of course increase the costs of companies 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, in which Turkey is located, is considered as one of the most sensitive regions to the negative effects of climate change. Turkey has begun to be affected by the negative aspects of global warming, especially the decrease in 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.
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. It is claimed that Turkey is exposed to the effects of climate change (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 some 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 of the environmentally harmful subsidies go towards heating. Turkey needs to 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 environmental. At this point, the first thing to do is to put a new tax application on the country’s agenda without being financially focused.
Turkey’s increase in greenhouse gas (GHG) emissions (+49%) during 2005–16 was the highest in the OECD. Yet it remains the only OECD member country to not commit 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 important step to be taken to prevent climate change is to prevent greenhouse gas emissions. States have turned to various economic tools at the point of emission reduction. One of these economic 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 is the country with 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 environmental performance among Eastern European countries. While Turkey’s environmental health score was 71.56 in 2018; It is decreased to 51.3 in 2020. In terms of ecosystem vitality, it ranks 136 with 36.9 points. The fact that the environmental quality is so low in the country surrounded by seas on three sides and with high biodiversity clearly shows that Turkey should focus on policies aimed at reducing its carbon emission intensity and improving 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).
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 the 70th place with 70.3 points. In the report, it was 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 important for both economic development and the 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 in order to prevent the increase of greenhouse gas, which is one of the biggest environmental problems of Turkey. Carbon tax, one of these economic tools, can have the desired effect in 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.
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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 5: https://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.
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URL 8: https://www.mfa.gov.tr/paris-anlasmasi.tr.mfa T.R. Ministry of Foreign Affairs, Paris Agreement. 28 August 2021.
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URL 10: https://tr.wikipedia.org/wiki/Karbon_vergisi Wikipedia, Carbonixation Tax. 27 August 2021.
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