Turkey Green Growth Policy Paper: Towards a Greener Economy

5.8 Policies for key strategic sectors

The strategic sectors covered in this policy note have a number of opportunities for greening, yet face a number of constraints – usually in the form of market, institutional or policy failure. Market failures can arise if the production of a good also creates some form of residual that is not ‘priced’ in the market. This is often the case with pollution – where the market does not reflect the true social cost of producing this good or service. In this case the rationale for government intervention is to internalize these environmental ‘externalities,’ which is viewed as correcting a market failure. An example of this is CO₂ or PM₁₀ emissions from the cement or iron & steel sectors. According to the ‘polluter-pays-principle’ the sector should be responsible for absorbing the additional costs of reducing pollution. Institutional failure is more difficult to define precisely, but can arise when there is a lack of government intervention or institutions to regulate certain behaviors. For example, the absence of a mechanism for water pricing in agriculture can be viewed as an institutional failure that leads to inefficient use. Policy failure is usually the circumstance where policy fails to achieve its intended objective. Many energy policies fall into this category, where subsidizing fossil fuels runs counter to efficiency objectives – resulting in over-consumption.

Re-incentivizing through policies is more complicated than it first appears, however the EU Directives offer some guiding principles that Turkey has to follow. Some examples of the major constraints faced, applicable EU Directives and some possible policy responses to guide the sector in its transition to a greener development path are presented in Table 5.3 below.

Table 5.3 Example policy responses among key strategic sectors

Sector	Greening potential	Major constraints	Major EU Directives and progress to date	Possible policy responses
Agriculture	Promoting soil conservation practices such as zero-tillage and pasture improvement	Lack of knowledge; resistance to change; limited availability of special equipment; and insufficient access to capital to finance the initial investment		Agri-environment schemes such as the Environmentally Based Agricultural Land Protection program (ÇATAK); Pilots sponsored through Priority Axis 2 of the IPARD program Local education and promotional campaigns to raise awareness of conservation tillage
	Irrigation water conservation	Inefficient use of water; leakages; nitrate pollution	Nitrate Directive	Public sector support for the diffusion of new knowledge through training and advice (extension) (e.g. support programs for nutrient reduction in meeting the Nitrate Directive) Water pricing reflecting scarcity value coupled with technical assistance programs on water-saving technologies and drainage (a form of tax)
Automotive	Energy efficiency Waste – recycling	Low-cost inputs leading to inefficient use Product innovation with greater recycled content	End-of-Life Vehicles	Full- or social-cost of inputs used (a form of tax) Producer responsibility – with take-back programs fed into secondary recycling markets; eco-labeling
Construction (buildings) Cement	Energy efficiency	Institutional arrangements and financing		Taxes on emissions/ output
	CO2 emissions Hazardous waste	Market-failure (CO2 not priced)	IPPC/ ETS Hazardous Waste	Taxes on emissions/ output; with eventual participation in Emission Trading System (ETS) Outright bans – restrictions; fines or penalties for violations
Electronics	Mercury, cadmium, lead and other toxic substances contained in e-waste	Short life-cycles leading to increasing volume; stakeholder coordination issues with the WEEE Directive	Hazardous Waste WEEE Directive	Life-cycle regulations requiring safe disposal per the Hazardous Waste and WEEE Directives; creation of hazardous (e-)waste collection points
Iron and steel	CO2 and PM10 reductions	Blast furnace technology is dated and emissions-intensive	IPPC/ ETS	Taxes on emissions/ output; with eventual participation in Emission Trading System (ETS)
	Reduction of emissions of dust, CO, heavy metals, Nitrous Oxides, Organic Gases and Steams, Dioxins and Furans	Importation of ‘dirty’ scrap requiring pre-treatment	Waste and Hazardous Waste Directives	Regulations on imported scrap; greater domestic recycling content to reduce reliance on imported scrap; eco-certified or labeled products
Machine industry	Handling of waste and e-waste	Institutional and market failure (absence of institutional structure for handling waste and the potential of recycling e-waste in secondary markets)	WEEE Directive	Waste management fees (both regular and hazardous); regulations on landfilling; eco-labeling
White goods	Handling of waste and e-waste	Institutional and market failure (absence of institutional structure for handling waste and the potential of recycling e-waste in secondary markets)	WEEE Directive	Waste management fees (both regular and hazardous; regulations on land-filling; eco-labeling

Note: The status of Directive harmonization and implementation is drawn from Turkey’s 2010 and 2011 Progress Reports, Communication from the Commission to the European Parliament and the Council, Enlargement Strategy and Main Challenges 2010-2011 and 2011-2012.