What is the European Green Deal?
Global
warming, climate change and greenhouse gas emission issues have become a global
agenda item especially since the 1990s. Within the scope of combating these problems,
many studies are carried out at the regional or international level.
The linear
economics idea of 'buy-build-use-throw' is one that cannot be sustained
anymore. This idea, which started in the Industrial Period and progressed
strongly until today, is in conflict with the idea of a clean environment. We
see that moving to a circular economy is most beneficial for our environment,
and many countries adopting this approach. The circular economy is an approach
that aims to keep the use of materials to a minimum in areas such as production
and consumption, increases reuse, and includes recycling.
The Paris
Climate Agreement was signed in 2015, and almost all of the countries in the
world have made some commitments to reduce greenhouse gas emissions and global
warming. In this sense, the European Union (EU) is the leader that encourages
other countries.
The main
purpose of the consensus is to create a cleaner and more sustainable world. It
also includes the steps to be taken for this. With this agreement, the EU aims
to reduce greenhouse gas emissions to net zero by 2050, not to depend on any
source in economic growth, and to develop not only a country or region, but the
whole world as a whole.
Who Was Affected by the Green Deal?
This
agreement is of great importance not only for EU member states, but also for
all countries that have political, economic and geographical relations with the
EU. Public and private sector organizations and those published in
international organizations fall within the scope of the agreement. The European
Green Deal regulates the EU's relations with all other states, institutions
and organizations.
Businesses
that cannot meet the necessary criteria will not be able to enter the EU
market. This means that companies that sell products mainly to EU countries
will terminate their export activities if they do not take the necessary
actions. Because, the agreement brings common criteria for all products and
services with commercial value, not a specific product or product group like
the regulations implemented in the past.
The European Green Deal impact on business will be significant, as companies need
to adapt to the new environmental and sustainability standards to remain
competitive in the EU market.
What is the Goal of the European Green Deal?
The primary
goal of the European Green Deal is to transform the European Union into the
first climate-neutral continent by 2050. This ambitious strategy not only aims
to eliminate net greenhouse gas emissions but also to decouple economic growth
from resource use, ensuring sustainability. It emphasizes a just and inclusive
transition, leaving no individual or region behind. Key objectives include
creating a circular economy, promoting sustainable industry, restoring
biodiversity, and achieving a clean energy transition. By integrating
environmental goals with economic policies, the Green Deal EU also
serves as a framework for fostering innovation, creating green jobs, and
encouraging global climate action.
The European Green Deal objectives aim to guide the EU toward a more
sustainable future. Among these are the European Green Deal goals,
such as achieving carbon neutrality and fostering economic growth through
innovation and sustainable practices. The European Green Deal targets are clearly defined, focusing on
reducing emissions and boosting clean energy adoption. The European
Green Deal policies are
structured to align environmental and economic interests, ensuring a balanced
transition across all sectors.
What changed after the Green Deal?
One of the
most important issues in the European Green Deal is Carbon Border Adjustment
Mechanism which refers to pricing, in other words taxation, of carbon in
products exported to the EU in order to reduce greenhouse gas emissions.
With this
regulation, the EU transfers its responsibility for reducing carbon emissions
to its commercial stakeholders and tries to ensure that they adopt it.
Companies, public and private sector organizations that escape this
responsibility will have to withdraw from the EU market.
No company
will be able to pass through customs as easily as before, especially
chemical-based food, medical, cosmetic products, electrical appliances and
personal protective products.
On the
other hand, it aims to make radical changes in consumer and business behavior.
It is now inevitable for companies to turn to sustainable products and
investments in order to stay in the EU market and increase their market share.
The EU uses pricing instruments such as taxes to ensure this in the new
economic order and works to keep the balance in the market stable while
reaching the final climate targets.
How Does the European Green Deal Affect Trade?
EU has
world’s largest export market with 80 countries. A large part of both import
and export activities are carried out with EU countries which is 16%. EU has a
great impact on other countries through trade. Thus, non –EU coutries need to
read the memorandum well and correctly in order to keep their relations with
the European Green Deal strong and sustainable. EU plans to carry out all
import and export activities within a new international trade in a new
environmental system in short time. EU helps third countries to develop their
socio-economic situation and attain the 2030 Sustainable Development Goals
(SDG).
Effects of the Green Deal on Exports?
The lack of
information access is expected to continue for 2 more years which will cause
problems for both in EU and non-EU companies. The
cost of modifying the production environment, adapting new technologies, and
systems will increase after the European Green Deal document is implemented.
The first
rule to be brought to prevent carbon emissions is to narrow down the production
areas that cause this to a high degree. That is, sectors that require high
energy are affected. In response to this, the projection of the European
Commission is that carbon leakage at the border may occur in some production
areas by 2030. These areas include coal, iron-steel, aluminum and cement,
textiles, chemicals, synthetic rubber, glass and glass products, ceramics,
paper pulp and some agricultural products.
Companies
can adapt to the new system more easily by taking steps to reduce carbon
emissions in production areas with individual investments. Different steps such
as investments that will reduce emissions, investments that aim to use other
types of energy, and the use of electric vehicles in production areas will make
it easier for companies to adapt. However, if we look at the cost situation of
these investments, we will see that they have high additional costs.
The
"New Climate Regime Report Through the Lens of Economic Indicators"
published by the Turkish Industrialists' and Businessmen's Association stated
the additional costs incurred in exports as follows:
1. If the carbon price per ton in the European Union is 30 Euros, the
carbon bill at the border is 478 million Euros. When other goods used in
production are added, this fee increases to 1085 million Euros.
2. In the case of a carbon price of 50 euros, together with the Border
Carbon Regulation (SKD) in the EU, emissions from final goods are 797 million
euros. When other goods used in production are added, this fee increases to
1809 million Euros.
3. The additional amount to be paid by the exporting companies if they do
not take these situations into account and continue to produce carbon
(depending on whether the carbon fee is 30 or 50 euros per ton):
· In the
cement industry it is 13.2-22 percent
· Iron and
Steel it is 1.7-2.8 percent
· Chemical
industry it is 1.1-1.9 percent
· Automotive
industry it is calculated as 0.7- 1.2 percent
The burden
of these costs is not decided to whom it will be given on but this may end with
high production costs.
EU-based
companies will get subsidies and R&D programmes from EU and will adapt
earlier than other companies while colloboration with other countries is
necessary and it is the plan of EGD.
Green Reconciliation Working Group's guidelines for working principles
The European Green Deal summary outlines the steps that Turkey should
take into account to maintain and improve its competitiveness in the EU market. As long as
the right steps are taken, it is possible to increase its market share. To
support this, a Working Group was formed under the leadership of the Ministry
of Commerce and a comprehensive plan was prepared, the "Green
Reconciliation Action Plan". This plan is a plan that aims to progress in
line with Turkey's previous purpose and target. These are a plan that aims to
reduce ecological scarcity by using resources efficiently and aiming at
sustainability without disturbing the environment.
At the
first stage, the Action Plan team aims to deal with companies specifically and
eliminate these effects due to the adverse effects of the SKD system on
exporting companies.
After the
adoption of the directive, specialized work teams will be established in
industrial areas such as recycling after use, investments supporting this
transformation, environmentally friendly energy, transportation use,
sustainable agriculture, steel, textile, aluminum, cement, and studies will be
started for the realization of relevant actions. Project proposals, financing, and legislative
needs will be determined based on the European Green Deal roadmap.
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For
detailed information on the subject of export contract, you can review the
content “Things to Consider in
Export Contracts”.
