Turkey Green Growth Policy Paper: Towards a Greener Economy

15 Gross Domestic Product is an imperfect metric in reflecting living standards as they depend not only on the production level, but are closely related to the accumulation of wealth, which can be depreciated or depleted over time. Accumulated wealth can be decomposed into produced, natural and intangible capital.

16 Framework legislation on nature protection has not yet been adopted. The list of potential Natura 2000 sites has not yet been compiled. The national biodiversity strategy and action plan, as well as the implementing legislation in this field remains to be adopted. There is growing concern about the possible adverse effects on potentially protected species of flora and fauna as a result of the building of new large water and energy infrastructure in the country. The amended by-law on the protection of wetlands has weakened their protection status, and falls short of the requirements of the Convention on Wetlands of International Importance. There is no clear allocation of responsibility for nature protection among the various competent institutions. The CITES Convention on the international trade in wild animals and plants is not sufficiently enforced (Turkey 2011 Progress Report, Communication from the Commission to the European Parliament and the Council, Enlargement Strategy and Main Challenges 2011-2012).

17 See for example OECD (2011), Bowen (2012), Toman (2012), and World Bank (2012c).

18 Turkey Economic Memorandum: Sustaining High Growth: Selected Issues. World Bank Report No. 39194, April 10, 2008.

19 With the exception of energy consumption, where TurkStat reports across 9 manufacturing subsectors in total.

20 With some € 26 billion annually, the automobile industry is the largest private investor in R&D in Europe (5% of the industry’s annual turnover, or about Euro 1,500 per vehicle), a significant part of which is devoted to technologies that reduce GHG emissions, improving engine efficiency and performance, with another part devoted to vehicle safety (ACEA 2009).

21 Except for the impact of the impact of the 2008 global economic crisis which deeply impacted the sector.

22 Turkey’s Industrial Strategy (MIT, 2011)

23 The number of entrepreneurs in the sector is about 18,000 (a proxy for the number of SMEs).

24 Drawn from Turkish Industrial Strategy Document, Ministry of Industry and Technology.

25 See World Bank (2011), Turkey: Balancing Development, Sector Competitiveness, and Challenges of Complying with the EU Environmental Aquis: Analysis of Household Appliances Sector and Implementation of Waste Electrical and Electronic Equipment Directive (2002/96/EC). Sector Note.

26 Source: FAOSTAT. The area under permanent pastures seems to be overestimated; a more realistic area would be around 12.4 million ha. Of these, only 8.7 million ha have been studied and classified.

27 The OECD Total Support Estimate (TSE) is an indicator of the annual monetary value of all gross transfers from taxpayers and consumers arising from policy measures which support agriculture, net of the associated budgetary receipts, regardless of their objectives and impact on farm production and income, or consumption of farm products. Source: OECD (2011), Evaluation of Agricultural Policy Reforms in Turkey, OECD Publishing. http://dx.doi.org/10.1787/9789264113220-en

28 The team combined three types of fertilizers as used in 2009 (nitrogen, N total nutrients, phosphate, P₂O₅ total nutrients, and potash, K₂O total nutrients) and divided it by the total number of hectares of arable land and permanent crops (thus excluding pastures because of their low fertilizer use).

29 Basri EVCİ at http://iwlearn.net/abt_iwlearn/history-of-iw-learn/pns/partner/nutrientfiles/turkey-files/evci_turkeynitrate.ppt/view, slide 30

30 The national legislation “Regulation on Protection of the Waters against Nitrate Pollution Caused by Agricultural Resources” has been adopted on February 18, 2004.

31 Conservation Agriculture is a technology defined as follows by FAO: (i) minimal soil disturbance (i.e. no-till): the tilled area must be less than 15 cm wide or 25% of the cropped area (whichever is lower); soil cover: ground cover must be more than 30%; and (iii) crop rotation.

32 5.2 million ha of irrigated land out of 24 million ha contributes to around half of the crop production. This Turkish ratio is higher than the global average (3.6 in Turkey versus 2.2 at a global level) where one-third of agricultural production is obtained by irrigating 18% of arable land.

33 According to FAO Aquastat, during the 1990-2000 decade, the use of irrigation water increased by 35-38%, while according to OECD, during 1990-92 and 2002-04 agricultural water use increased by more than 80%^. In the same period, agricultural GDP increased by only 11-12%.

34 Molle, F.; Berkoff, J. 2007. Water pricing in irrigation: Mapping the debate in the light of experience. In: Irrigation water pricing: The gap between theory and practice, Chapter 2, eds F. Molle and J. Berkoff. Comprehensive Assessment of Water Management in Agriculture. IWMI/CABI. Forthcoming.

35 The EC Enlargement Strategy and Progress Report 2011 for Turkey states: “There is some progress to report in the area of agriculture and rural development. Significant progress has been made in the implementation of the Instrument for Pre-Accession Assistance for Rural Development (IPARD) programme, leading to the Commission Decision to confer the management of EU funds, as well as in preparations achieved for the second phase of the IPARD programme. Agricultural support policy differs substantially from the CAP and there is still no strategy for its alignment. The failure to fully remove barriers to beef imports also constitutes a major shortcoming.”

36 The EC Enlargement Strategy and Progress Report 2011 for Turkey states: “In the environment area, Turkey has made good progress on waste management, whereas only limited progress can be reported on horizontal legislation, air quality and industrial pollution control and risk management. Turkey made very limited progress on water quality, chemicals and on administrative capacity. No progress can be reported on nature protection. Regarding climate change, Turkey made limited progress on awareness-raising on EU climate requirements, but a more robust and ambitious climate policy, both domestically and internationally, has yet to be established”.

37 In this Note the term “agri-environmental measures” will be used in a broader and more flexible way than the EU detailed specifications.

38 Such standards includes soil protection by maintain soil organic matter and soil structure through appropriate measures, protection of ground water from pollution and against Nitrates pollution, conservation of natural habitats and of wild flora, etc.

39 Opportunities for complementary policies exist but as Strand and Toman (2010) conclude, there are few obvious candidates for triple-win policies delivering strong benefits for short-term economic recovery, and long-term growth + environmental benefits. Triple-win policies bridge the temporal differences of often competing objectives understood that policy tradeoffs, and decisions made, are part of a dynamic adjustment process. Compliance with EU Directives is a good case in point. Sectors expected to be hit hard by requirements may be eligible for a phased approach to compliance and the government may want to create incentives for early adopters.

40 This model extends a previous CGE model which was designed to analyze Turkish energy and climate change policy (Voyvoda and Yeldan 2010).

41 CO2 emissions is used to represent GHG emissions as CO2 equivalent (eq.).

42 Following Gunther et al. (1992).

43 The strategic sectors were identified in the Industry Strategy Document of the Ministry of Industry and Energy as Iron and Steel, Machinery, Automotive, Electronics , White Goods, and Construction.

44 Lerner (2009).

45 An important caveat is that the analysis and results presented here do not account for the transaction costs and other institutional measures needed to implement proposed greening policies, and as such, the results should be interpreted with caution and as indicative of the possible effects of the greening policies considered.

46 A discussion of this aspect of green policies in the context of European firms can be found in the recent World Bank report: Golden Growth: Restoring the Luster of the European economic model (Spotlight 2: Greening Europe’s Growth) (World Bank 2012b).

47 As noted, for modeling purposes, green jobs/employment is defined as follows: tax revenues are collected by the government and used to hire workers at the ongoing (fixed) real wage rate from the pool of unemployed workers. These jobs are used in various greening activities (reflected in reduction of the emissions coefficients of the relevant pollutants), and the corresponding wages are added in the model as income for the single household sector. In this sense, greening increases labor force and private consumption, which contributes positively to growth. Revenues allocated to green jobs could also be interpreted as transfers from the government to the unemployed to engage in greening activities by the private sector, thus indirectly subsidizing greener production activities by providing green labor to the companies (free of cost), and constituting an innovative case of public-private partnership. This way, the government is using pollution taxes to achieve two important objectives: reduce unemployment and improve environmental quality. Future model improvements could consider adding a 13^th sector (pollution abatement industry) with appropriate care to ensure that payments for this are charged against capital expenditures such that there is no double counting of capital used in production and intensity remediation.

48 The modeling exercise estimates the potential of the Turkish economy to create green jobs, however it does not give the distribution of these by sector. Modeling the green job creation potential at each sector would necessitate more detailed information on sectoral production structures, which is beyond the limits of this study.

49 This assumption satisfies the neutrality condition for the base run as dictated by the CGE literature. More analysis would be needed to reflect a more realistic picture of the current irrigation techniques, which is for the moment beyond the limits of this study.

50 NPV over 2014-2030 period at 12% discount rate

51 Irrigation efficiency improvements include: providing drainage to 1.2 million ha salinized irrigated areas, installing piped systems including sprinklers in all 3.3 million ha new irrigation developments to be carried out in the future, and increase/improve water charges to induce savings for the total irrigable area of 8.5 million ha.

52 The assumption here is that conservation tillage requires a few years before its impacts on crop yield can become effective, thus 5 years was assumed to be the “warm up” period.

53 keeping in mind the important caveat that analysis and results presented here do not account for the transaction costs and other institutional measures needed to implement the proposed greening policies, and as such the results should be interpreted with caution and as indicative of the possible effects of the greening policies considered.

54 Under the policy scenarios below, productive rates are endogenized through abatement benefits.

55 Price level index refers to consumer price index. For the reference year, the price level index is assumed as unity (fixed to 1) to calibrate the model based on the CGE literature.