Şimşek: Türkiye's climate target requires 300 billion dollars

Şimşek spoke at the session titled "Global Finance Summit" held within the scope of the 31st Conference of the Parties (COP31) to the UN Framework Convention on Climate Change, hosted by Türkiye for the first time.

Emphasizing that the real test is to find the resources required to achieve ambitious goals, Şimşek said that 2026 is an extremely challenging year.

Minister Şimşek pointed out that the biggest energy supply shock in recent history was experienced and that this had very important macroeconomic effects and said, "The 2053 net zero target is of course very important for us here. We are focusing on this. We are an emerging market, a growing economy, so we need to continue to grow continuously, but can you decarbonize yourself while growing? This is very important. Can you create your green industry? These are the problems before us."

Stating that there are two components in terms of energy, Şimşek stated that they have very ambitious targets on the energy side and that they target 175 gigawatts of solar and wind energy by 2040.

Şimşek stated that the low-carbon path is not an option for them, but an obligation, and explained that more than half of Türkiye's exports are to Europe and that is why they need to invest in decarbonization.

Pointing out that the real challenge here is to produce both cheap and clean energy, Şimşek continued as follows:

"Is it possible to decarbonize the industry? We believe that this can be achieved, but the main questions that need to be answered here are how much it will cost and how it will be financed. Calculations show that a resource of approximately 300 billion dollars is needed in line with this target. Türkiye's financial stance is quite strong. Despite spending over 100 billion dollars for the reconstruction of the infrastructure after the earthquake, our budget deficit is approximately 3 percent of the Gross Domestic Product. The ratio of our public debt to GDP "The rate is at a very modest level, at approximately 22 percent. Therefore, we have significant financial maneuvering space, but we believe that public resources alone will not be sufficient to achieve these ambitious targets."

Minister Şimşek stated that, for this reason, they need the support of multilateral development banks such as the World Bank and the European Bank for Reconstruction and Development (EBRD) and said:

"The aim here is not only to obtain loans from these institutions, but also to mobilize private capital from different sources and reduce the risks of investments. Multilateral development banks can pave the way for private sector investments by providing guarantees and assuming risks. It is of great importance that institutions such as the World Bank, EBRD and IFC are involved in this process as partners. Türkiye has a strong financial position and sufficient room for action to achieve these goals."

"Energy accounts for a large part of Türkiye's current account deficit"

Minister of Treasury and Finance Şimşek noted that more than 70 percent of Türkiye's primary energy resources are imported and stated that this corresponds to a large part of the current account deficit.

Pointing out that Türkiye has paid approximately 600 billion dollars to import oil and natural gas in the last 10 years, Şimşek concluded his words as follows:

"(This) is higher than our gross external debt. Therefore, when we look at our energy system, it is clear that we need to increase our renewable energy capacity. This will also strengthen our economic resilience. Therefore, we will continue our investments in renewable energy. The economic justification for this is very clear. While decarbonizing our energy system, we are also turning to expanding electrification. Thus, we are investing in our resilience and competitiveness while reducing our dependence on energy imports and macrofinancial risks. Thanks to this transformation, we are investing in our resilience and competitiveness to provide energy to our industry at more affordable and competitive prices." However, there are many more steps that need to be taken in the coming period.”