Circular Economy And Low-Carbon Production: Green Transformation Support Program

30 Oca Circular Economy And Low-Carbon Production: Green Transformation Support Program

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I. INTRODUCTION

Climate change and sustainability have become some of the most pressing issues on global agenda today. Circular Economy and Low-Carbon Production: Green Transformation Support Program Implementation Principles Communiqué (the “Communiqué“), published in the Official Gazette dated 26/07/2024 and numbered 32613, represents a significant step toward environmental transformation. The program is designed to support investments that align with the circular economy approach, protect natural resources, contribute to climate and sustainability goals, and promote resource-efficient and low-carbon production. Aimed at supporting the green transformation processes of companies operating in industrial sector through various incentives and practices, the Green Transformation Support Program (the “Program“) seeks to promote environmentally friendly practices and emphasizes environmental responsibility.

The Communiqué regulates (i) content of the roadmap to be presented within the scope of the Program, (ii) project objectives eligible for incentives under the Program, (iii) principles for applying to the Program, (iv) supports and elements provided under the Communiqué, and (v) monitoring, revision, and completion processes of the projects. In this article, legal framework and implementation principles of the Communiqué will be examined.

II. FUNDAMENTAL PRINCIPLES

1. What Should the Roadmap Report Include?

Roadmap Report (the “Report“) is a document prepared in line with the performance indicators set for the projects (the “Project“) within the scope of the Communiqué, along with the minimum five-year plans of equity companies established in Türkiye (the “Investor“) applying to the Program. The Report must include the status, objectives, and implementations of the Project and must be prepared in the format announced by the Republic of Türkiye Ministry of Industry and Technology (the “Ministry“).

The Report must include an explanation of green transformation practices that the Investor will implement at the facility level, and it is mandatory to present at least one Project proposal. Furthermore, the Report should encompass the Project’s purpose, scope, current situation assessment, identification of existing problems and solution approaches, project objectives and the green transformation practices to be executed to achieve these objectives, as well as the size of the Project.

To coordinate the preparation, implementation, and monitoring processes of the Report, the Investor establishes a team of at least 3 (three) individuals (the “Green Transformation Team“). This team is managed by a natural person (the “Green Transformation Leader“) who is an employee on the Investor’s payroll, a partner, or a member of the board of directors, appointed to carry out the green transformation processes within the facility. Notifications regarding the Program are communicated by the Directorate General of Strategic Research and Productivity (the “Directorate General”) to the Green Transformation Leader.

2. Which Projects Are Eligible for Incentives?

The Project objectives within the scope of the Communiqué should be determined per unit of production by considering: (i) energy consumption, (ii) greenhouse gas emission amounts, (iii) air pollutant emission amounts, (iv) carbon footprint, (v) water footprint, (vi) raw material consumption, (vii) waste amount, (viii) water consumption, (ix) wastewater amount, (x) wastewater pollution load, (xi) amount of recycled inputs from facility waste. Projects must incorporate green transformation practices to achieve these objectives. In other words, Projects are required to demonstrate improvement in at least one of the indicators.

During the application process, attention must be paid to the threshold values that are mandatory under the relevant legislation. If such threshold values exist, only improvements beyond these thresholds will be considered within the scope of the Program.

3. What Are the Principles for Applying to the Program?

The individuals eligible to apply to the Program and the procedures and principles of application have been determined within the scope of the Communiqué. The particularly important points are as follows:

Only equity companies established in Türkiye and operating in the manufacturing industry may apply to the Program.

The Report, which is mandatory to submit within the scope of the application, must be uploaded by the Investor to the Program portal within no later than 40 (forty) business days following the completion of the Project application entered into the Program portal; otherwise, the Report will be excluded from evaluation.

The application on behalf of the Investor is carried out by the Green Transformation Leader, and the Green Transformation Leader must be authorized by the Investor in accordance with the provisions of the Authorization Communiqué on the Electronic Execution of Investment Incentive Certificate Procedures, published in the Official Gazette dated 31 May 2024 and numbered 30437.

Investors may submit a project application for a specific investment address, if there is no existing open incentive certificate issued under the Program at the same address.

If a sector-specific call is announced during a period when a general call is open, organizations operating in the relevant sector may only apply to the sector-specific call.

4. What Are the Supports and Their Components Provided Under the Communiqué?

Projects to be supported under the Communiqué may include the purchase of land and plots, building and construction expenses, acquisition of machinery, equipment, technology, software, and hardware, as well as measurement, verification, certification, survey, testing, and consultancy services. However, these are limited to production facilities and auxiliary units operating in the manufacturing industry. Moreover, the Program does not provide support for entirely new investments or for R&D or investment activities aimed at the development or production of technologies and products. Only additional new investments to be made in existing facilities can benefit from the supports under the Program. Activities aimed at establishing renewable energy generation facilities can be supported with a separate investment incentive certificate under the Decision on State Aids in Investments (the “Decision“), which was put into effect by the Council of Ministers’ Decision dated 15/06/2012 and numbered 2012/3305.

On the other hand, for Projects approved for support, the incentives stipulated under Article 17 of the Decision are provided. Additionally, for Projects decided to be supported under Article 9 of the Communiqué, an Investment Incentive Certificate is issued by the General Directorate of Incentive Implementation and Foreign Investment (the “GDIF”) without any further evaluation.

5. How Are the Monitoring, Revision, and Completion Processes of the Projects Carried Out?

Monitoring is the process conducted by evaluators appointed by the Directorate General, following the completion of each calendar year, for Projects with an investment period exceeding one year, in order to examine the progress status of the Project. If there is no Project being carried out under an Investment Incentive Certificate, the monitoring of the Report is conducted once a year.
Revisions can be made to (i) project objectives, (ii) green transformation practices, and (iii) Investment Incentive Certificates issued within the scope of the Program. If these revision requests are deemed appropriate following the examination by evaluators appointed under the Communiqué, they are notified to the GDIF. An important point to note regarding revisions is that a new revision request cannot be submitted until 6 (six) months have passed since the previous one. The sole exception to this rule is revision requests that relate exclusively to the elements registered in the Investment Incentive Certificate.

Upon reaching the completion stage, the final status measurement must be conducted within 30 (thirty) business days following the end of the investment period projected for the Project. After the measurement results are uploaded to the program portal, they must be approved by the Investor. The Directorate General then determines whether the project objectives have been achieved by comparing the initial measurements submitted during the application with the final status measurements, and reports this to the GDIF. The conditions to be fulfilled based on the Project objectives are: (i) achieving at least 75% (seventy-five percent) realization of the project goals, and (ii) surpassing any mandatory threshold values required by the relevant legislation in force at the time of application, if applicable. If the Report is successfully completed, the Investor is granted a period of 1 (one) year to submit a new Report. In the event that the Investor fail to submit any Report within this period, the title of “Green Transformation Center” is revoked.

CONCLUSION

The regulations addressed within the framework of the Program hold critical importance for both economic development and environmental sustainability. The adoption of environmentally friendly green transformation strategies is, beyond legal compliance, a critical approach for achieving long-term economic and ecological balance. Therefore, the alignment of legal regulations and Projects with sustainability principles will be a fundamental element in securing the economic and environmental future.

The full text of the Communiqué can be accessed here.