Voluntary carbon markets are developed independently of goals and policies of governments with a view to combating climate change and are capable of attracting all sectors of the business world, local governments, NGOs and individuals for carbon equalization purposes. Even though the voluntary carbon market represents a very small part within the global carbon market, it provides an opportunity for Turkey, which is already effectively making use of this market, to take part in carbon markets in the future.
The issues of burning fossil fuels, change in land use, global warming caused by a rise in greenhouse gas emissions resulting from deforestation and waste and climate change are constantly on the global agenda, gaining more and more importance. According to the 2007 Fourth Evaluation Report released by the Intergovernmental Panel on Climate Change, global warming is an indisputable fact and the majority of it is most probably caused by humankind.
This problem, the perpetrators and victims of which are humankind, is a global and common one. The solution, therefore, must be global and common. The biggest step taken on a global scale is the United Nations Framework Convention on Climate Change and the legally binding document of this convention on reducing greenhouse gas emissions called the Kyoto Protocol.
Opportunity and threat
The main elements in fight against climate change are reducing greenhouse gas emissions that cause climate change and adapting to climate change itself. The fight against climate change brings about various opportunities and threats for economies. The main solution to reduce greenhouse gas emissions is nation-wide measures taken by countries (energy efficiency, shifting to renewable energy, etc.). And when such measures fail or become more costly, market-based instruments come into play.
Market-based instruments can be more financially efficient in emission reduction as they encourage the development of more cost-effective emission control and prevention technologies and provide greater flexibility in the selection of technology. They can also provide a source of income for states to promote environmental and social initiatives.
The topical issue of emission trading or more commonly known as carbon trading is among instruments intended to allow for targeted emission reduction by creating financial incentives. It is a market-based instrument that can be quite effective if implemented properly. These mechanisms, which are project or sector based, are based on certification and trade of reduced greenhouse gas emissions on the market. It is useful to be familiar with the terms such as carbon finance and carbon equalization to better understand this matter at hand. Carbon finance is described as resources provided for a project to purchase the reduction of greenhouse gas emissions (World Bank, 2006). Carbon equalization is the process of emission equalization, which is carried out by purchasing credits or certificates granted through greenhouse gas emissions that are reduced or prevented from any other source anywhere in the world in response to greenhouse gas emissions from one source.
The Kyoto Protocol defines emission trading mechanisms to support developed countries to achieve nominal greenhouse gas emission targets and to introduce carbon emission reducing practices at a lower cost and to support developing countries to facilitate their access to carbon finance and clean technologies.
Carbon finance
Carbon markets, which are an economical solution in fight against climate change and create a ground for the use of carbon financing, have continued to grow exponentially, especially since the Kyoto Protocol came into force in 2005 while emissions reduced in these markets have hit 11 billion tons of CO2. The largest share in the carbon market, which has a nominal value of around USD 170 billion, of the EU Emission Trading System, which covers 28 member states of the European Union and is equivalent to USD 140 billion. The trade volume of emission trading mechanisms under the Kyoto Protocol is approximately USD 30 billion. The Voluntary Carbon Market is of a rather limited volume of USD 600 million.
Kyoto Protocol
Even though Turkey cannot benefit from flexibility mechanisms on emission trading as set out by the Kyoto Protocol, voluntary carbon market projects, which are developed within the framework of environmental and social responsibility principles and operated independently of such mechanisms, are being developed and implemented in Turkey.
Voluntary carbon markets are developed independently of goals and policies of governments to combat climate change and are attracting all sectors of the business world, local governments, NGOs and individuals for carbon equalization purposes. Greenhouse gas emission certificates traded in voluntary carbon markets are called Voluntary or Verified Emission Reduction- VER Certificates.
Organizations purchase carbon certificates issued for projects that reduce greenhouse gas emission in order to reduce and balance emissions by calculating the amount of greenhouse gas emissions (by measuring their carbon footprints) resulting from their operations as a part of their social responsibilities. As of now, all projects that are implemented in Turkey are traded in the Voluntary Carbon Market. By means of 218 projects run in Turkey, the majority of which are on renewable energy, it is estimated to reduce greenhouse gas emissions equivalent to 16 million tons of CO2 with an annual market value of around USD 100 million. In addition to contributing to the improvement of Turkey’s technical infrastructure, it is safe to say that the voluntary carbon market, which has mobilized a high quality potential in Turkey in a short period of time, makes investments in clean technologies to attract investors.
Even though the voluntary carbon market represents a very small part within the global carbon market, it provides an opportunity for Turkey, which is already effectively making use of the market, to take part in carbon markets in the future.
Momentum gained
On the other hand, carbon trading efforts in Turkey, which serve as an important financial instrument in the fight against climate change, have recently gained significant momentum. There are targets to establish a carbon market by 2015 as indicated in the Climate Change Action Plan, the Action Plan of the Istanbul International Finance Center Strategy and the Strategic Document on Energy Efficiency.
In conclusion, the private sector, which is one of the most vital actors of carbon markets, has a major role to play. It is important for the Turkish private sector, which is a competitive one in the global market, to closely follow the climate change regime unfolding around the world and take necessary precautions against the risks posed by economic transformation and make use of opportunities in a timely manner.
