The Middle-Income Country with the Highest Potential in Climate Technologies: Turkey
How is the climate tech sector evolving in Turkey? Last month, Startups Watch released its report on tech investments for the first nine months of 2024. In Turkey, sectors like fintech, e-commerce, and gaming dominated the top ranks, while climate technologies didn’t even make it into the top ten regarding total investment value. However, when examining the number of investments, climate tech deals have nearly doubled compared to last year, surpassing fintech. Yet, these investments are primarily small, seed-stage deals with relatively low financial value. Globally, however, climate technologies — alongside AI and defense tech — are among the top three sectors attracting substantial funding. More significantly, Turkey has immense potential in this field. Let’s delve into why.
As you may know, the World Bank published its World Development Report on the “middle-income trap” last month. I previously shared my insights on this report, noting that Turkey was highlighted in two key areas. First, the TOBB University of Economics and Technology internship system gained considerable attention in Turkish media. However, the second area, which discusses Turkey’s potential in climate technologies, was largely overlooked.
According to the World Bank, Turkey stands to benefit the most among middle-income countries from the anticipated global rise in demand for climate tech-based products. This assessment analyzed middle-income countries’ “comparative advantages” in specific products. A country that is technologically advanced in climate tech and exports a wide array of these products is deemed to have a “competitive advantage.” This analysis shows Turkey ranks fourth in climate technologies, following Bulgaria, India, and Mexico. More importantly, the report also examines how closely a country’s competitive products align with climate tech products. This speaks to how swiftly a country could shift toward producing high-demand climate tech products in the future. In this regard, Turkey is the middle-income country with the highest potential. China is excluded from this category, as its massive overcapacity already disrupts global market balances across several industries.
Climate technologies encompass scalable, standardized products like solar, wind, geothermal, and battery technologies and emerging, less standardized products such as nuclear fusion, lab-grown meat, fertilizer-free agriculture, waste management, and eco-friendly materials. The second category of technologies requires robust university research, making it less accessible to countries with limited R&D infrastructure. Hence, Turkey is better positioned for the first category of scalable technologies, whereas its primary competitor is China. Considering the trade barriers China faces globally, Turkey’s potential in climate tech becomes even more apparent.
What should Turkey do to foster climate technology growth? First, public policies must take climate change seriously. Pending legislative measures on climate issues should be prioritized and swiftly enacted. An IMF study of 40 countries and five sectors from 2000 to 2021 demonstrated that tangible public policies — such as R&D incentives — significantly increased the number of climate tech patents.
Second, fostering genuine collaboration between significant energy companies and innovative startups is crucial. Such partnerships should be substantive and institutional, not merely “innovation theater.” The only way to achieve this is if established energy or heavy industry companies genuinely feel concerned about their future. These companies thrive under various public privileges, but the state must clarify that these privileges won’t last indefinitely. Only then will they embrace innovation for their survival.
Third, climate policy has increasingly become synonymous with protectionism, with the European Union (EU) leading the charge. For example, the EU’s new packaging and recycling regulations could challenge Turkey’s plastic recyclers. The EU now defines “recycled plastic” as plastic recycled within the EU, and if recycling takes place outside the EU, the process must meet EU standards individually. Similar regulations may soon apply to steel, where Turkey’s steel industry heavily relies on scrap steel. For these sectors to successfully transition into climate technologies and remain competitive, Turkey must retain access to EU markets, which will require establishing new lobbying channels in Brussels.
This article is a translated version of “İklim teknolojilerinde en yüksek potansiyelli orta gelirli ülke: Türkiye’ which was initially published in Economic Daily (Nasıl Bir Ekonomi Gazetesi) on October 11, 2024.
