We Aim To Support Our Country’s Transition To A Sustainable Economy

We talked to Mustafa Tuzcu, Deputy Minister of Trade, about the European Green Deal and its opportunities and possible impacts on our industry

“It is of vital importance that all our sector representatives follow the developments in the EU closely, make preparations and plans to adapt to changes, analyse their needs, investigate cooperation opportunities with the sectors in the EU and determine the steps they will take in this regard, contact and exchange information and experience with their EU organisations regularly, and always maintain the public-private sector cooperation in all these areas,” says Mustafa Tuzcu, Deputy Minister of Trade of the Republic of Turkey, describing the Green Deal Adaptation Action Plan implemented as an important step to establish the infrastructure for Turkey’s green development model. Deputy Minister Mustafa Tuzcu evaluated the opportunities and possible threats of the European Green Deal, the sectors that would be most greatly affected by the issue, and Turkey’s future steps regarding the Deal.

With the comments of Ministry of the Trade, what is the European Green Deal and how will it affect our industry?

The 21st century saw the rise of transformation in many areas, with especially digital and green transformation at the heart of the global agenda. As part of these transformations; the European Union announced, in 2019, its goal to be the first carbon-neutral continent by 2050 and adopted the European Green Deal, its biggest initiative since the establishment of the Single Market as a new growth strategy, stipulating comprehensive changes in the EU policies from industry to financing, from energy to transportation and agriculture. With sustainability further coming into prominence by the COVID-19 pandemic, we saw the leading actors of international trade, especially the USA, China and South Korea announcing similar goals after the EU announced its green transformation goals. Hence, we see the European Green Deal as a significant strategy document that has integrated the climate change-related policies into international economy and trade policies by producing what you’d call a domino effect.

Such developments in the EU and in the World have also placed our activities on the fight against climate change at the centre of our trade policies. In fact, $70 billion (41%) out of our country’s $170 billion exports to the World in 2020 was made to the EU-27 countries. If we add the United Kingdom to the equation, for it will probably implement such changes as well, this figure increases to $81 billion. Therefore, we can say that comprehensive changes stipulated in the Green Deal of the EU such as the Carbon Border Adjustment Mechanism, the New Industrial Strategy, and the Circular Economy Action Plan, will inevitably and directly impact the value chains that we are integrated via close commercial and economic integration we have achieved with the EU through the Customs Union.

ENERGY-ORIENTED SECTORS SUCH AS STEEL, CEMENT, AND AUTOMOTIVE WILL BE AFFECTED BY CARBON BORDER ADJUSTMENTS

In this respect, I also want to talk about the Carbon Border Adjustment Mechanism since it is a serious concern, especially for our exporters. Although the scope of the mechanism to be implemented in 2023 is yet to be clearly defined, we consider that energy-oriented sectors such as steel and cement, which have the highest share in greenhouse gas emissions, are likely to be targeted by this adjustment. But I would also like to point out that this mechanism could also be applied in the value chains of the final product. In this case, industries that use these sectors as inputs and have an important place in our exports, such as automotive, may be affected. The EU has not yet determined the details of its implementation either and continues consultations with its trade partners and shareholders.

On the other hand, the carbon border adjustment mechanism will not be the only aspect of the Green Deal that will affect trade. Along with the Industrial Strategy and Circular Economy Action Plan announced after the European Green Deal, the EU is expected to implement comprehensive legislative changes in the coming years in parallel with the sectoral strategies expected to be announced in the future. As part of the sustainable product policy initiatives to be implemented under the Circular Economy Action Plan, the aim is to reduce the environmental footprint and improve circularity with the designs of products to be supplied to the EU market, especially in the textile, electronics, furniture, plastics, batteries, food, packaging and building materials industries.

And we will encounter these new criteria of the EU for the products not only as standards to meet in our exports to the EU but within the scope of our technical legislation harmonisation that allows the free movement of goods at the Customs Union as well. The impact of such changes will not be limited to legislation and practices, however. The EU is now on its way to create an ecosystem in which value chains and consumers will be guided in terms of green transformation goals as part of its target to become a carbon-neutral continent in almost all areas, and this will also affect our sectors. Including consumers as a part of the green transformation will lead to reshaping demands and preferences of the final product consumers, even if it is not made mandatory by legislation.

Some see it as an opportunity while others believe that it could actually be a threat; what is your take on what the EGD will bring for Turkey?

The EU, which takes up more than 40% of our exports, is the most important export market for our country with quite a challenging competition. Thus, if we cannot adapt to the EU policies at least to a certain extent, we will be at the risk of fading into the background within the global value chains of the EU and damage our competitive advantage. Therefore, it is important for us to closely monitor these comprehensive changes stipulated in EU policies, to take steps towards ensuring the necessary adaptation, and to keep up with this long-term transformation in the world economy and trade.

Given our advantages such as our Customs Union partnership and geographical location; if we can closely monitor the main aspects of the European Green Deal that may affect our country, we will be able to eliminate the risk of losing our competitive edge in foreign trade by turning the upcoming process into an opportunity for our country. In fact, our current Customs Union relations with the EU actually provides a ground for our companies, which are already integrated into the EU value chains, to adapt to the changes brought by the Green Deal, and to further deepen and reinforce the existing integration. We can use our companies’ dynamic structures, adaptation capabilities to the new conditions and current integration with the EU value chains as an advantage to further deepen and reinforce this integration in the upcoming periods. All steps that we will take to turn this new period into an opportunity will also encourage new production habits that focus on digitalisation with high added-value to meet the changing expectations of the 21st century, and all these will contribute to the growth of our country.

What kind of activities does Turkey carry out within the scope of the Carbon Border Adjustment Mechanism, which will be implemented in 2023?

First and foremost, it is extremely important for us to protect our country’s rights arising from international agreements throughout the carbon border adjustment mechanism process of the EU and not to allow the mechanism to turn into a technical obstacle for our trade. Our Ministry closely followed the impact analysis and public consultation processes of the European Commission in consultation with all relevant private sector and public representatives. And we conveyed our comprehensive views on the issue to the European Commission. We expressed our concerns about the EU’s compliance with the basic rules and principles included in mutual and international agreements, especially the Customs Union and the Free Trade Agreement signed with European Coal and Steel Community as well as compliance with WTO rules. We emphasized the need for establishing close cooperation with Turkey through consultations. Turkey also requested, as a candidate country and Customs Union partner, to have access to similar financing mechanisms that

the EU offers to its Member countries. We will continue our written and verbal consultations with the EU in terms of both fulfilling the requirements of the Customs Union and looking at the issue in terms of our country’s membership and the close trade and economic integration with the EU. We will also continue our active participation in the World Trade Organisation discussions on the issue and we will evaluate the process in coordination with other countries In the mean time, it is also important for Turkey to take necessary actions to reduce greenhouse gas emissions in our related sectors to ensure that possible carbon border adjustments do not pose any obstacle to our integration with the EU through the Customs Union. For this purpose, we prepared a Turkey’s Green Deal Adaptation Action Plan. In this plan, coordinated by our Ministry in close consultations with the Ministries of Environment and Urbanisation & Industry and Technology, actions to conduct sector-based studies and activities to limit the impact of the carbon border adjustments on Turkey-EU trade and to evaluate the adaptation of a national carbon pricing mechanism.

The EU shared the necessary financing resources and models to achieve its Green Deal goals concretely and put them in its budget when it announced the measures within the EGD. Will we be able to see the financing measures specified in the EGD Action Plan to be announced by the Ministry in the upcoming budgets? In this context, will the Ministry of Trade focus on new training, financing and awareness-raising activities for the industry in the near future?

In addition to the effective use of EU mechanisms such as the Instrument for Pre-Accession Assistance and Union Programs, in which we participate, we need to take initiatives to access the financing opportunities that we will need within the scope of green transformation. To achieve that, we have included activities in the latest version of our EGD Action Plan to Access the EU’s financing mechanisms. Our Ministry also took action in this regard and started negotiations with the European Commission for our country’s access to the financing opportunities of the EU.

And we have included in our Action Plan initiatives and activities to benefit not only the financing opportunities of the EU but international financing as well. In addition, there are initiatives for green transformation in parallel with the developments in the EU, to both develop our national financing system and a green and sustainable finance ecosystem to provide green finance in our country. All these initiatives included in the Action Plan will be carried out by relevant institutions with the contributions of our Ministry. In addition, we plan to carry out informative, introductory and incentive activities together with the relevant and executive institutions to obtain maximum benefit from the available financing opportunities in line with the European Green Deal targets.

What will be the top priority steps of the Green Deal Action Plan that will be published in the near future? Can you talk about your short-term steps? And can you give us a schedule prediction?

I am pleased to announce that our Working Group, which we established with the participation of relevant public institutions, has reached its final stage of preparations for our Action Plan. We will share our Action Plan with the public right after we complete our preparations for its final version. We have gathered our goals in our Action Plan under the titles of (1) carbon border adjustments, (2) a green and circular economy, (3) financing, (4) clean, economic, and safe energy supply, (5) sustainable agriculture, (6) sustainable smart transportation, (7) fight against climate change, (8) diplomacy and (9) the current state of EGD and awareness-raising activities. Our current schedule to achieve these goals spans from 2021 to 2027.

We can summarise our short-term actions as impact and needs analysis of carbon border arrangements on energy and resource-oriented sectors and determining our country’s position in the transition to a carbon pricing mechanism suitable for our country; conducting detailed impact and needs analysis of priority sectors within the framework of the circular economy and preparing the national Circular Economy Action Plan; evaluating development areas of renewable energy and energy efficiency and completing the Renewable Energy Resource Guarantee Certificates (YEK-G Certificate) activities, reducing the use of pesticides and antimicrobials with regards to sustainable agriculture and reducing food loss and waste.

We have also other short-term actions such as introducing “Combined Transport” and “Logistics Centre” Regulations, preparing the national legislation for the Green Port Certificate Program and developing the electric vehicle charging infrastructure under the sustainable smart transportation title; and preparing the 2023-2030 Climate Change Action Plan and 2050 Climate Change Strategy under the fight against climate change.

Again, under these broad titles, and in line with the financing needs of our country for green transformation; determining the steps that we can take for the national financing system, ensuring the effective use of current international/EU financing opportunities and also developing an ecosystem to ensure the development of green finance in our country are among the steps that we will take in the short term.

Do you think the “Green Deal Action Plan” alone can pioneer our country’s green transformation? Or what kind of initiatives and projects can be introduced to support it? What would you suggest for the business world to prepare to turn this transformation into an opportunity for our country? Although industry and energy are undoubtedly at the core of this transformation, areas such as logistics and foreign trade are also within the scope. At this stage, what kind of activities should we expect from different sectors?

We designed our Green Deal Adaptation Action Plan as a roadmap with goals and actions to ensure Turkey’s adaptation to the comprehensive changes stipulated by the European Green Deal, in a way that will preserve and further the integration that we achieved within the scope of the Turkey-EU Customs Union. Our main goal here is to support our country’s transition to a sustainable and resource-efficient economy.

However, we should not underestimate the important role of our private sector in turning this upcoming transformation into an opportunity for our country. I should mention that the fight against climate change has become an important part of not only the economic and trade policies of countries, but also the visions of international companies, and a growing number of international companies have made commitments to decarbonize their value chains. Similarly, we see that international companies of bigger scale in our country with higher awareness and adaptability starting to place sustainability at the centre of their vision and production processes and making commitments to become carbon neutral, albeit slowly.

However, not only such companies, but all of our private sector should make green transformation one of their priority areas of work. The changes stipulated in the European Green Deal cover a much wider spectrum beyond industry and energy, with agriculture, infrastructure, construction, transportation, investment, financing and even the fundamental elements of commercial life, including conscious consumption. In this respect, the adaptation of our private sector, especially our exporting sectors, to these changes is quite significant in terms of our close economic integration with the EU through the Customs Union and to maintain our competitive edge in foreign trade.

Therefore, it is essential for our private sector to include strategies in their business plans that focus on sustainability, environmentally-friendly production models, renewable energy and energy efficiency and reducing their carbon footprints to stay relevant and make the best use of the new opportunities that will emerge in the European market. They should also focus on digitalisation and increasing the knowledge, skills and competence of their employees on green jobs. The EU continues to work on taxonomy legislation, which will set the criteria for environmentally sustainable investments. In this respect, our companies can increase their chances in the European public tenders, and they can also access financing far more easily if they develop projects in line with such taxonomy criteria, which are ow taken as a reference by an increasing number of financial institutions. To sum it up, I can say that all our sector representatives should closely monitor the developments in the EU, be prepared to adapt to the changes, analyse their needs, investigate their cooperation opportunities with the EU sectors and determine their future steps, make contact and exchange information and experience regularly with their EU organisations, and achieve public-private sector cooperation in all these areas. The Green Deal Action Plan will be an important step in establishing the infrastructure for Turkey’s green development model.

Interview: Muhammed Özçelik – Büşra Şener