Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00005576 IMPLEMENTATION COMPLETION AND RESULTS REPORT ON A SMALL GRANT TF0A9626 IN THE AMOUNT OF US$2 MILLION TO THE REPUBLIC OF TURKEY FOR THE PARTNERSHIP FOR MARKET READINESS II PROJECT October 7, 2021 Energy & Extractives Global Practice Europe And Central Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective {September 29, 2021}) Currency Unit = Turkish Lira (TL) TL 8.837 = US$1 US$ 0.113 = TL 1 FISCAL YEAR January 1 - December 31 Regional Vice President: Anna M. Bjerde Country Director: Auguste Tano Kouame Regional Director: Charles Joseph Cormier Practice Manager: Sudeshna Ghosh Banerjee Task Team Leader(s): Ayse Yasemin Orucu ICR Main Contributor(s): Mehmet Ozcan, Mehmet Huseyin Yilmaz ABBREVIATIONS AND ACRONYMS BAU Business-as-usual CCAMCB Climate Change and Air Management Coordination Board CO2 Carbon dioxide CDM Clean Development Mechanism COP Conference of the Parties CPF Country Partnership Framework CPS Country Partnership Strategy DGRE Directorate General for Renewable Energy DPL Development Policy Loan EMRA Energy Market Regulatory Agency ESES Environmental Sustainability and Energy Sector ETS Emissions Trading System EU European Union EU ETS European Union Emissions Trading System EU-IPA European Union Instrument for Pre-Accession Assistance EXIST Energy Exchange Istanbul FM Financial Management FY Fiscal Year GDP Gross Domestic Product GHG Greenhouse gas GIZ German Agency for International Cooperation ICR Implementation Completion and Results Report INDC Intended Nationally Determined Contribution ISR Implementation Status Report JI Joint Implementation LULUCF Land use, land-use change, and forestry M&E Monitoring & Evaluation MBI Market-based Instrument MENR Ministry of Energy and Natural Resources MoEU Ministry of Environment and Urbanization MoIT Ministry of Industry and Technology MoT Ministry of Trade MoTF Ministry of Treasury and Finance MRP Market Readiness Proposal MRV Monitoring, Reporting, Verification MW Megawatt NCCAP National Climate Change Action Plan NCCS National Climate Change Strategy NDC Nationally Determined Contribution PA Partnership Assembly PDO Project Development Objective PIU Project Implementation Unit PMR Partnership for Market Readiness PP Project Paper tCO2e (metric) tons of carbon dioxide equivalent TOR Terms of reference TRY Turkish Lira UNFCCC United Nations Framework Convention on Climate Change USD United States Dollar VCM Voluntary Carbon Market TABLE OF CONTENTS DATA SHEET ....................................................................... ERROR! BOOKMARK NOT DEFINED. I. CONTEXT AND DEVELOPMENT OBJECTIVES ..................................................................... 3 A. Country Context .....................................................................................................................3 Sector and Institutional Context..................................................................................................3 Higher Level Objectives to which the Project Contributes ............................................................5 Theory of Change (Results Chain) ................................................................................................6 B. Significant Changes during Implementation.............................................................................9 II. OUTCOME .................................................................................................................... 10 A. Relevance of PDOs ............................................................................................................... 10 B. Achievement of the PDOs (Efficacy) ...................................................................................... 10 C. Efficiency .............................................................................................................................. 13 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 15 A. Key Factors During Preparation ......................................................................................... 15 B. Key Factors During the Implementation ............................................................................. 16 Factors outside the control of government and/or implementing entities .................................. 16 BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME ......... 17 A. Quality of Monitoring and Evaluation (M&E)...................................................................... 17 B. Environmental Safeguard, Social Safeguard, and Fiduciary Compliance ............................... 18 C. Bank Performance ............................................................................................................. 18 LESSONS LEARNED AND RECOMMENDATIONS ..................................................................... 19 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 21 ANNEX 2. PROJECT COST BY COMPONENT ........................................................................... 28 ANNEX 3. RECIPIENT, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ...... 29 ANNEX 4. SUPPORTING DOCUMENTS (STAKEHOLDER FEEDBACKS DURING THE ICR MISSION)42 The World Bank Partnership for Market Readiness 2 Project (P168730) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P168730 Partnership for Market Readiness 2 Project Country Financing Instrument Turkey Investment Project Financing Original EA Category Revised EA Category Not Required (C) Not Required (C) Organizations Borrower Implementing Agency Republic of Turkey Ministry of Environment and Urbanization Project Development Objective (PDO) Original PDO The development objective(DO) is to support Turkey in developing the legal, institutional and technical framework for piloting an emissions trading scheme (ETS). FINANCING FINANCE_TBL Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) Donor Financing TF-A9626 2,000,000 1,928,928 1,928,928 Total 2,000,000 1,928,928 1,928,928 Total Project Cost 2,000,000 1,928,928 1,928,928 Page 1 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) KEY DATES Approval Effectiveness Original Closing Actual Closing 05-Feb-2019 01-May-2019 31-Dec-2020 28-Feb-2021 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 23-Dec-2020 1.54 Change in Loan Closing Date(s) KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Satisfactory Substantial RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 21-May-2019 Moderately Satisfactory Moderately Satisfactory 0.00 ADM STAFF Role At Approval At ICR Regional Vice President: Cyril E Muller Anna M. Bjerde Country Director: Mariam J. Sherman Auguste Tano Kouame Director: Riccardo Puliti Charles Joseph Cormier Practice Manager: Sameer Shukla Sudeshna Ghosh Banerjee Task Team Leader(s): Ayse Yasemin Orucu Ayse Yasemin Orucu ICR Contributing Author: Mehmet Ozcan Page 2 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) I. CONTEXT AND DEVELOPMENT OBJECTIVES A. Country Context 1. Turkey’s current Government was formed in July 2018, following national elections held in June 2018. In September 2018, the Government launched the National Economic Program (NEP) which set out Turkey’s macro-fiscal and structural reform strategy and is a comprehensive statement of the Government’s policy intent for the near-term. Partnership for Market Readiness (PMR) Phase II project, via the introduction of a Emissions Trading System (ETS) pilot preparations, was a valuable tool in meeting the targets aiming to reduce the emissions. Sector and Institutional Context 2. Priorities related to sustainability have been elaborated on in various strategy documents. These include the Electricity Market and Security of Supply Strategy (2009), the National Climate Change Strategy (NCCS, 2010-2023), the National Climate Change Action Plan (NCCAP, 2011-2023), the Energy Efficiency Strategy (2012)1 and the Energy Efficiency Action Plan (2016) which was revised in 2018 and Turkey’s 10th Development Plan (for the 2014-2018 period). Building on these strategies and successful fundamental energy sector reforms over the last decade, Turkey has been moving decisively to develop an increasingly reliable and efficient energy supply while mitigating climate change impacts. 3. In April 2012, Turkey adopted legislation to design and implement a robust, installation level greenhouse gas emission Monitoring, Reporting, and Verification (MRV) in the energy and industrial sectors. The Ministry of Environment and Urbanization (MoEU) issued the “Regulation on Monitoring of GHG Emissions� in April 2012. This regulation was supported with the “Communiqué on Monitoring and Reporting of GHG Emissions� (July 2014) and the “Communiqué on Verification of GHG Reports and Accreditation of Verifying Bodies� (April 2015). The MRV regulation mandates all installations with over 20 MW combustion capacity and certain production levels to monitor their own GHG emissions and have them verified by third parties and submitted to the MoEU. As of today, a total of about 700 installations have registered in the online GHG registry system, representing roughly 70% of emissions. 4. Since 2009, Turkey has stepped up its international engagement on climate change. The national GHG inventory submitted to the UNFCCC Secretariat in April 2017 reports the total GHG emissions in 2015 were 475.1 million tons of CO2 equivalent, excluding LULUCF (Land Use, Land Use Change and Forestry). Turkey’s per capita GHG emission for 2015 amounted to 6.07 tons of CO2 equivalent. The energy sector had the largest share with 71.6%, followed by the industrial processes and product use with 12.8%, agriculture with 12.1% and the waste sector with 3.5%. Turkey ratified the UNFCCC in 2004 and its Kyoto Protocol in 2009. Turkey put forward its Nationally Determined Contributions (INDC) target to the UNFCCC Secretariat in September 2015, committing to achieve emission limitations of up to 21% from the business-as-usual (BAU) by 2030, which means a pledge of reducing GHG emissions up to 246 million tons by the target year. Below is a figure showing Turkey’s BAU and INDC emissions path. 1The Bank supported these strategies under the Environmental Sustainability and Energy Sector Development Loan Program series. Page 3 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) Figure 1: Turkey’s BAU and INDC Emissions Path 5. Turkey’s Climate Change Strategy and Action Plan have provided the framework for increased domestic efforts on climate change in key sectors. They identify national priorities for mitigating GHG emissions and building resilience through managing impacts and encouraging mitigation and adaptation to climate change. The Plan covers key sectors in line with national development priorities: energy, transport, industry, waste, land use, agriculture, and forestry. While incorporating existing plans to develop medium and long-term targets in these sectors, it does not include cost and resource requirement estimates or establish specific emission reduction targets. The broad Strategy and Action Plan gains further significance when considered in combination with the concrete implementation actions in, among others, the energy sector, with strong climate change co-benefits. Turkey had requested the World Bank’s development policy and investment lending support for its climate change program. 6. The Climate Change Action Plan includes a range of actions necessary for establishing a carbon market in Turkey, including, inter alia, monitoring and reporting of GHG emissions in key sectors, identifying GHG reduction potentials and cost curves, and making the necessary legal and institutional arrangements to establish a carbon market. The establishment of a carbon market is one of the main pillars of the Istanbul Financial Center Strategy and Action Plan2. In line with this strategy, a Carbon Market Technical Working Group (CMTWG) was formed by the Ministry of Environment and Urbanization (MoEU) under the Climate Change Coordination Board which was established by the Prime Ministry Circular No. 2010/18, to work on the technical issues and submit recommendations to the Government regarding the establishment of a carbon market, with the participation of representatives from the Capital Markets Board of Turkey, Borsa Istanbul, Istanbul Gold Exchange, Turkish Derivatives Exchange, and Istanbul Stock Exchange Clearing and Settlement Bank. While Turkey did not made a final decision on the specific use and scope of carbon pricing or 2 Istanbul Financial Center Strategy and Action Plan, in order to have Istanbul to be an international financial center, determines the priorities and measures for building a legal infrastructure that operates in international standards, increasing the diversity of financial products and services, developing a simple and effective tax system, improving regulatory and supervisory framework, strengthening the physical and technological infrastructure, ensuring an education system that provides qualified human resources in required fields and establishing an organizational structure that will promote and monitor at global scale. Page 4 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) market-based mechanisms to address GHG emissions, the Monitoring, Reporting, Verification (MRV) Regulation and the supporting online GHG registry comprise the most important underpinning towards the implementation of any carbon pricing and market-based instrument (MBI). 7. Turkey joined the PMR in 2011 and was the first country to sign a Grant Agreement with the World Bank. With the help of the preparation grant funding, Turkey prepared its Market Readiness Proposal (MRP), outlining the activities that it intended to undertake during the implementation phase of the PMR. Turkey submitted its final MRP and was granted an Implementation Phase funding of US$3 million by the PA in May 2013. The implementation phase (PMR Turkey Project or Phase I) started in February 2014 and ended in December 2018. The Phase I components were based on Turkey’s MRP and included activities necessary to implement the MRV system and those that aim at informing policy decisions on the use of market-based instruments. INDC 8. The MRV Pilots and the analytical reports under the PMR Phase I have provided important policy and regulatory developments. The MRV Regulation entered into force in 2014, over the course of Phase I and its implementation was supported by an online registry for regulated installations’ submission of emissions reports. Developed by the MoEU as part of the harmonization process with the EU ETS Directive, the workability of the Regulation and the registry was first tested with the PMR support through the MRV pilots. The experience gained through the pilots has been useful to the MoEU for understanding practical issues facing the private sector in complying with a new regulation. Higher Level Objectives to which the Project Contributes 9. The PMR project was included in the World Bank’s FY18-FY21 Country Partnership Framework (CPF) for Turkey which was initially designed to cover the FY18–21 period but has recently been updated and extended to include FY22–23 through the Performance and Learning Review (PLR). The PMR Phase II project supports the objective 9 of the extended CPF which is “climate action�. 10. The PMR Phase II Project complemented and had important synergies with other Bank operations in Turkey. The World Bank Group announced a target for 35% of its financing to have climate co- benefits globally, on average, over the next five years in December 2020. Within this strategic context of World Bank Group, PMR Turkey Phase II Project has complemented the activities that have been successfully undertaken by the PMR Phase I Project, the core objective of which is to increase the level of readiness towards implementing carbon policies and MBIs in Turkey through MRV pilots and analytical studies. Approval of the Climate Change Strategy and Action Plan, upon which the Phase I activities were built, was part of the Turkey Development Policy Loan (DPL) series. The Project was also in synergy with the ongoing European Union (EU) Instrument for Pre-Accession Assistance (IPA) funded Energy Sector Technical Assistance Project’s review of alignment of Turkey's legal and institutional framework for electricity, natural gas, energy efficiency, and renewable energy with the EU's energy acquis. The ongoing Green Growth Project which is a series of climate and green growth analytics focused on what is required to build a green and climate informed economy and how to enable private investment for climate action and the CCDR (Climate Change and Development Report) which is a new analytical tool that the Bank will deploy in all countries to capture the interplay between development and climate are among the other related Bank operations. 11. The PMR Phase II Project has been in line with Turkey’s development goals, the objectives of important policy and strategy documents, as well as key legislation on energy efficiency and renewable energy. The Project accord with several policy and strategy documents, including the 10th and the 11th Development Plans, the NCCS, and the NCCAP. The Project directly contributed to Page 5 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) meeting the two milestones listed in the NCCAP, namely the “implementation of the Climate Change Action Plan with the help of technical assistance� and “adoption of market-based mechanism for GHG emissions.� They also fit well with some of the recent, key legislation on energy efficiency and renewable energy, including the Renewable Energy Law of 2005, the Energy Efficiency Law of 2007, and the updated Electricity Market and Supply Strategy, approved in 2009, all incorporating the objective of climate change mitigation. There are several references to the establishment of carbon markets and/or an ETS in Turkey among the legal and strategic documents, including the Environmental Law (1983, amended in 2006) and the NCCAP. The annual budget of the Ministry of Energy and Natural Resources for 2012-2017 included assessment of local and sectoral ETS options and appropriate actions to harmonize the Ministry’s policy with the domestic and international climate change policies.3 The Strategy published by the Energy Exchange Istanbul for 2016-2023 highlights the need for establishing an ETS market. Theory of Change (Results Chain) 12. The project was designed as a recipient-executed trust fund to be managed by the World Bank and executed by the MoEU. The project included consultancy services to support Turkey in developing legal, institutional and technical framework for piloting an ETS. The long-term outcomes were envisaged as readiness for a market-based instrument, likely an ETS, which could potentially be integrated to the EU ETS. The results chain of the project is described in the Table 1 below. Table 1: Results Chain Activities Outputs Intermediate Long-term Outcomes/ Outcomes/ PDOs Objectives (i) Preparation of -Draft Climate Change Law Legislative and gap analysis report -Draft ETS by Law institutional -Draft Offsetting Communique framework for (ii)Preparation of -Draft Auctioning Communique piloting an ETS was compatibility and -Draft Institutional Setup developed. interaction analysis report (i) Identification of For Activity (i) Technical the emission cap -An ETS cap and national allocation framework for and development plans for each MRV sector were piloting an ETS was of the national developed developed. allocation plan; -Emission trajectory for the years between 2020-2035 -Data Availability and Quality Report -Final Report -Excel Tool to analyze the results (ii) Development of For Activity (ii) 3 http://www.enerji.gov.tr/tr-TR/Butce-Konusmalari/Sn-Bakanin-Butce-Sunus-Konusmalari Page 6 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) the ETS transaction -Software design document Emission registry in Turkey; -Security report trading scheme -Linking report in operation -User and administration manuals and emissions -Deployment of the source code to reduced to ministry servers mitigate -Final report climate change (iii)Development of For Activity (iii) emission trading -Administration and user manuals simulation for -Software design document Turkey; -Security document -Deployment of the source code -Workshop Reports -Bulletins -Final report (iv) Assessment of For Activity (iv) Article 6 market -Conference of the Parties (COP) 25 mechanisms of the summary report Paris Agreement -Status report and options for -Final negotiation strategy Turkey. -Organizational structure proposed for Article 6 of Paris Agreement Trainings, increased awareness and capacity of The Government consultations, government and private sector staff, private sector workshops and stakeholders and academia public awareness capacity activities strengthened to develop ETS pilot. Project Development Objectives (PDOs) 13. The PDO is to support Turkey in developing the legal, institutional and technical framework for piloting an ETS. Project Beneficiaries 14. The main project beneficiary is the MoEU as the lead Ministry for Turkey’s climate change policy and the designated implementing agency for PMR. The project also provided benefits to the relevant Ministries and other Government institutions as they relate to the legal, institutional or technical framework developed for piloting an ETS. Other direct beneficiaries included private sector that would be impacted by an ETS. The public gained increased awareness on climate change and carbon pricing practices. PDO-Level Results Indicators 15. The PDO-level results indicator: ETS is “pilot-ready� in Turkey, through developing technical, legal, and institutional framework. Page 7 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) Key Expected Outcomes and Outcome Indicators 16. Development of technical, legal, and institutional framework and piloting an emissions trading scheme through engaging key stakeholders. Project Components 17. The PMR Phase II Project had four components: Component 1: Technical assistance to develop the legislative and institutional foundations for piloting an ETS (allocated: US$350,000; disbursed: US$337,768.03) This component aimed to provide technical assistance and input to the MoEU to draft the policy and administrative documents to establish the legal and institutional framework for an ETS pilot. Component 2: Establishing the technical foundations for piloting an ETS in Turkey (allocated: US$1,100,000; disbursed: US$1,090,594.92) Establishment of an ETS requires a robust technical infrastructure and capacity, as well as sound policy choices. Phase I of the PMR Turkey Project prepared an implementation roadmap for an ETS pilot in Turkey. Phase II implemented this roadmap, by carrying out the aspects that are necessary to initiate an ETS pilot, including: i. Identification of an ETS cap and a national allocation plan ii. Developing an ETS transaction registry in Turkey iii. Running an ETS simulation iv. Assessment of market mechanisms of Article 6 of Paris Agreement and options for Turkey. Component 3: Stakeholder Training, Consultation/Engagement and Public Awareness Activities (Allocated: US$220,000; disbursed: US$242,570.88) This component included: (i) conferences, workshops, and training to support the activities under Components 1 and 2; (ii) consultation meetings with stakeholders; and (iii) public awareness activities (media, decisionmaker-level public/private meetings, etc.) Component 4: Coordination and Expert Support (Allocated: US$330,000; disbursed: US$257,993.73) The MoEU has implemented the second phase of the PMR Project through the project implementation unit (PIU), which was established under the previous phase. The PIU consisted of a Project Technical Coordinator, a Financial Management and Disbursement Specialist, a Procurement Specialist and a Project Assistant in addition to the staff of MoEU. Lending Instrument 18. The Project funds have been channeled through a recipient-executed trust fund (RETF) under the PMR multi-donor trust fund.4 For Phase II, the request for financial assistance made on behalf of the Republic of Turkey was accepted by International Bank for Reconstruction and Development (IBRD) 4The project is classified as Investment Project Financing within the World Bank system (for more information, see the World Bank OP/BP 10.00). Page 8 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) with a grant not to exceed US$2 million dollars. Financing agreement for PMR Phase II was signed between World Bank and Turkish Republic on February 21, 2019. Project Cost and Financing 19. The cost of the project has been covered by a grant not to exceed US$2.00 million. Financing has been provided by the PMR additional financing (US$2.00 million). Breakdown is provided in Table 2. In-kind contributions were made by the Turkish Government in the amount of US$45,000. Table 2: Project Cost and Trust Fund Financing (US$) Project Components Expected Cost Actual Cost Component 1: Technical assistance to develop the 350,000 337,768 legislative and institutional foundations for piloting an ETS Component 2: Improving the technical foundations for 1,100,000 1,090,595 piloting an ETS in Turkey Component 3: Stakeholder Training, Consultation / 220,000 242,571 Engagement and Public Awareness Activities Component 4: Coordination and Expert Support, including 330,000 257,994 Operating Costs Total Costs 2,000,000 1,928,928 Total Financing from Trust 2,000,000 Fund B. Significant Changes during Implementation 20. No significant changes was applied in the course of project implementation. Other Changes 21. The scope of the Project has been extended with the inclusion of a Draft Climate Law, an offsetting communique, an auctioning communique and draft institutional set up without any change in the allocated budget. 22. The project closing date was extended for two months with the objective of organizing Closing Conference delayed due to COVID-19 related restrictions. This extension was only concerned with the project timeline and had no budgetary implications. Page 9 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) II. OUTCOME Assessment of Achievement of Each Objective/Outcome A. Relevance of PDOs 23. Relevance of PDO is High. The project objectives are highly relevant to the country’s development agenda and the World Bank’s CPF. The PMR project is included in the World Bank’s CPF for Turkey which was initially designed to cover the FY18–21 period but has recently been updated and extended to include FY22–23 through the PLR. The PMR Phase II project is aligned with the objective 9 of the extended CPF which is “climate action�. 24. At COP 21 in Paris in December 2015, Parties to the UNFCCC reached a landmark agreement to combat climate change and to accelerate and intensify the actions and investments needed for a sustainable low-carbon future. The Paris Agreement for the first time brought all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects. Turkey signed the Agreement in 2016 and ratified it in October 2021. Turkey submitted its INDC in the run-up to the Paris conference, pledging a GHG emissions reduction of up to 21 percent in 2030 as compared to a BAU scenario. The PMR project is highly relevant in this context as Turkey’s INDC includes the use of carbon credits from international market mechanisms to achieve its mitigation target. In addition according to Turkey’s 11th Development Plan (for the 2019-2023 period) Turkey is among the countries that will be affected most from climate change and is already faced with an increased incidence of sudden rains, flood and drought and efforts to reduce emissions and to adapt to climate change have been continuing. PMR Phase II project, via the introduction of an ETS pilot, was a valuable tool for the targets aiming to reduce the emissions. 25. Given the alignment and consistency of the project with the current CPF and Turkey’s INDC, relevance of PDOs is rated High. The project is crucial in terms of its contributions for the fulfilment of INDC of Turkey submitted to UNFCCC. In addition, the outputs of the project are in alignment with the Electricity Market and Security of Supply Strategy (2009), the National Climate Change Strategy (2010-2023), the National Climate Change Action Plan (2011-2023), the Energy Efficiency Strategy (2012)5 and the Energy Efficiency Action Plan (2016) which was revised in 2018 and Turkey’s 10th and 11th Development Plans as well as the Ministry of Energy and Natural Resources’ Strategic Plan (2019- 2023). B. Achievement of the PDOs (Efficacy) 26. Efficacy of the PDO is Substantial. The PDO is to support Turkey in developing the legal, institutional and technical framework for piloting an ETS. 27. The project was delivered with good level of efficacy and the project development objectives were achieved within the targeted timeline and the allocated budget. 28. All the stakeholder trainings, consultation/engagement and public awareness activities have been conducted successfully by exceeding the targeted level. In addition; during the stakeholder 5 The Bank supported these strategies under the Environmental Sustainability and Energy Sector Development Loan Program series. Page 10 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) consulations as a part of the Implementation Completion and Results Report (ICR) mission, most of the stakeholders claimed that the project outputs were overachieved much beyond their expectations. 29. The PDO Indicator is the necessary framework for implementation of an ETS pilot in Turkey in place, as a result of the development of the technical, legal, and institutional underpinnings, and engaging key stakeholders. 30. First, for the legal framework, the indicator measures whether a draft climate change law and an ETS Regulation are developed for a pilot ETS in Turkey by the end of 2020. Draft climate change law and ETS by-law were finalized by the end of November 2020 with wide stakeholder participation. Furthermore, scope of the “Development of legal infrastructure for piloting an ETS� was extended to comprise Offsetting Communique and Auctioning Communique which were developed and finalized by mid December 2020. 31. As also confirmed during the stakeholder consultations, awareness and the capacity of the stakeholders have been substantially raised during the preparations for draft climate change law. This draft law will provide a perfect basis for the enactment of the law in Turkish Grand Assembly, since it was prepared based on the feedbacks and expectations of all stakeholders. 32. Second, the indicator measures whether a draft institutional framework is developed for a pilot ETS in Turkey by the end of 2020. Draft institutional framework was finalized by the end of September 2020. In addition, an institutional setup for governance of the climate change law has been developed. Minister of Environment and Urbanization stated that Turkey would start discussions for adopting a climate change law in the Parliament in 2021. Therefore, draft institutional framework prepared by the feedbacks of all stakeholders will provide a basis for the Ministry for the adoption of the Climate Change Law. It also provides the linkages of draft climate change law with other relevant legislation and the responsibilities and roles of different institutions for the implementation of Climate Change Law. 33. Third, for the technical framework, the indicator measures whether an ETS Cap and allocation plans for MRV sectors are established, an ETS registry and a simulation software are developed, and related technical studies are conducted by the end of 2020. All of these intermediate results indicators have been realized as can be seen in Table-3. Table-3: PMR Turkey Progress for Second Component PMR Turkey Activities Progress Identification of the emission cap and Completed in November 2020 development of the national allocation plan Development of the ETS transaction registry in Completed in October 2020 Turkey Development of emission trading simulation for Completed in August 2020 Turkey 34. The activities mentioned in by-Law on Monitoring of GHG Emissions are included in pilot ETS such as cement, primary iron and steel, electricity, secondary iron and steel, pulp and paper and refineries. While no political decision has been made on the introduction of carbon pricing in Turkey, Page 11 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) establishment of technical foundations is integral to the analytical basis for the establishment of an ETS. 35. The activities under Component 3 and 4 which aimed to support first two components horizontally such as stakeholder trainings, consultation/engagement and public awareness activities have been conducted by overachieving the targeted levels. Activities performed within the scope of Component 3 and Component 4 of PMR Phase-II project for adequate delivery of planned outputs of Component 1 and Component 2 are given in Table-4. Table-4: Activities Performed According to the Project Components Objective of the Activities performed Outputs Component Component within the scope of Component 36 and Component 47 Component1: This component 1 kick-off meeting, 5 -Draft Climate Change Law, Technical specifically targets one-on-one -Draft ETS by-law assistance to the development of stakeholder feedback -Draft ETS Auctioning Communique develop the the draft Climate rounds and 1 closure -Draft Offsetting Communique legislative Change Law with conference have been -Draft Institutional setup: An and pilot ETS legal carried out by the institutional setup for governance of institutional framework and consultants and the the climate change law. foundations institutional setup. MoEU. -Gap Analysis Report and case studies: for piloting A gap analysis was used to compare an ETS the existing Turkish legislations and institutional set up with the international examples (United Kingdom (UK) and California) -Compatibility and interaction analysis report Component (i) Identification of -Kick-off meeting -An ETS cap and national allocation 2: Improving the emission cap -3 stakeholder meeting plans for each MRV sector were the technical and development rounds developed which covers more than foundations of the national -20 one-to-one 50% of whole emissions in Turkey. In for piloting allocation plan; stakeholder meetings order to find the optimum ETS design, an ETS in -2 trainings for ministry 14 different scenarios have been Turkey on modelling analyzed in TIMES-MACRO model. -Closure meeting -Emission trajectory for the years between 2020-2035 -Data Availability and Quality Report -Final Report -Excel Tool to analyze the results ii) Development of -Kick-off meeting -Software design document the ETS transaction -Inception meeting -Security report 6 Component 3: Stakeholder Training, Consultation / Engagement and Public Awareness Activities 7 Component 4: Coordination and Expert Support, including Operating Costs Page 12 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) registry in Turkey; -1 training -Linking report -User and admin manuals -Weekly Development meetings -Deployment of the source code to ministry servers -Closure conference -Final report (iii) Development -Kick-off meeting -Admin and user manuals of emission trading -5 Stakeholder -Software design document simulation for meetings -Security document Turkey; -1 training -Deployment of the source code -Bi-weekly -Workshop Reports Development meetings -Bulletins -Closure conference -Final report (iv) Assessment of -Kick-off meeting For Subcomponent (iv) Article 6 market -6 stakeholder -COP 25 summary report mechanisms of the meetings -Status report Paris Agreement -Closure conference -Final negotiation strategy and options for -Organizational structure proposed Turkey. for Article 6 of Paris Agreement 36. Project website (available in Turkish and English) has been live since June 2016, presenting the final project deliverables, project documents, reports, presentations and information on project activities.8 The project website also contains a number of World Bank and PMR knowledge products related to carbon pricing, including the Turkish translation of some key PMR reports. The PMR Turkey social media accounts in LinkedIn and Twitter are also live. 37. The closure conference was organized in January 2021 to present the final version of the legal texts and recommendations for the next steps with the wider stakeholders. This one-day event brought together about 360 participants from public, private sectors, academia and non-governmental organizations (NGOs). C. Efficiency 38. Efficiency is rated as Substantial. Even though the project closing date was extended for 2 months, from December 31, 2020 to February 28, 2021, to be able to organize the closure conference effectively and to enable Turkish Ministry of Treasury and Finance to utilize the funds in a timely manner, the project was delivered with substantial level of efficiency and the project development objectives were achieved within the targeted timeline and the allocated budget. 39. The ICR assesses the efficiency in “use of resources� as substantial in line with the following factors: (i) The project has realized and surpassed all PDOs by the end of 2020. The scope of Component-1 is extended to include Draft ETS Auctioning Communique, Draft Offsetting Communique and Draft Institutional setup for governance of the climate change law. These additional tasks have been fulfilled in a timely manner without additional budget requirement. 8Project website can be reached at: https://pmrturkiye.csb.gov.tr/. The website statistics from 2017 show 50 to127 daily visits, 1531 to 3943 monthly visits, and 345,397 downloads (including project reports, presentations, brochures and photos). Page 13 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) (ii) Of the USD 2,000,000 approved for the project for the implementation phase, USD 1,928,927.56 was disbursed for the PMR Phase II Project. (iii) Actual component costs remained slightly less than the estimated costs at appraisal. The Project savings are due partially to virtual execution of the project activities in lieu of physical arrangements due to the COVID-19 pandemic and to the devaluation of the Turkish Lira over the last few months. 40. In addition to the aforementioned factors, the interviews conducted by the Bank team during the ICR mission showed an overwhelmingly positive reception of the project activities within the scope of PMR Phase II project. Many of the stakeholders claimed that the project management, stakeholder involvement as well as the positive attitudes and the enthusiasm of the consultants and the staff of MoEU created a participative and encouraging atmosphere well above their expectations and which ultimately led to the achievement of the project objectives without any additional budget requirement. 41. The MoEU staff was supported by the external PIU experts, including a Project Technical Coordinator, a Financial Management and Disbursement Specialist, a Procurement Specialist, a Project Assistant in addition to the staff of MoEU. The PIU composition involving the MoEU’s own staff and external experts allowed for a strong in-house expertise and an efficient coordination for high quality deliverables and cross-fertilization among project activities. Additionally, a senior communication expert was hired to ensure the highest level of visibility for the project’s outcomes under Phase II by the direct stakeholders (such as government agencies, private sector, academicians), citizens as well as decision makers. The MoEU staff was already experienced and built a capacity in project management thanks to PMR Phase I Project implementation which led to some savings from Component 4 budget and made the Phase II implementation more cost-efficient. Overall Outcome Rating 42. The project had no shortcomings in its relevance. The relevance of PDO was high both at the project level and on the client side. Therefore, relevance is considered as High. Efficiency and Efficacy are considered as substantial. Thus, the overall outcome rating is satisfactory as shown Table 5 below. Table 5: Overall Outcome Ratings Relevance of PDO High Efficacy Substantial Efficiency Substantial Overall Outcome Rating Satisfactory Other Outcomes and Impacts 43. Turkey has been actively involved in sharing its experience with other countries. According to the PMR Secretariat’s Annual Report 2018, Turkey has led other countries in implementing most of the PMR activities, completing all activities related to development of carbon pricing (carbon tax, ETS, and crediting) as well as core technical activities such as MRV and data management and registries. Among the 19 countries participating in the PMR as implementers, Turkey has been considered a leader in advancing project implementation and in sharing knowledge with other countries, including terms of references (TORs) for projects activities, establishment of GHG MRV, reports and lessons learned. Page 14 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) 44. The fact that Turkey has confirmed its intended submission of EOI for PMI is an indication of strong foundation established by the PMR projects and the satisfaction of the Beneficiary from the achievements of the PMR projects and its intent to sustain and complement the activities accomplished in PMR projects through the deployment of PMI. 45. The project has helped strengthen local analytical capacity for effective implementation of Turkey’s INDC. Turkey has been exploring the feasibility and potential outcomes of MBIs to meet the targets announced in its INDC and more broadly to support the decarbonization of the economy. However, no political decision has been taken regarding the introduction of an MBI (although as part of EU accession discussions, Turkey plans to consider harmonization of primary and secondary EU ETS legislation). While some stakeholders appear more open than others to any type of MBI (be it an ETS or a carbon tax), the industry associations as well as the Ministry of Industry and Technology (MoIT) and Ministry of Trade (MoT) have expressed the desire to see more analytical work, especially on the potential impact of the policies and instruments on their specific sectors. Another critical point emphasized by the stakeholders during stakeholder consultations conducted within the scope of ICR mission is the importance of creating a transparent and fair operation of the MBIs without any room for unfair competition. 46. The Energy Exchange Istanbul (EXIST) announced in their Strategic Plan for 2019-2023 that the establishment of green certificate and carbon based energy markets is within the scope of their area of responsibility with approval of Ministry of Energy and Natural Resources and Energy Market Regulatory Authority. EXIST representatives participated in the PMR workshops regularly and actively and provided detailed comments on the ETS pilot activities. 47. Turkish Energy Market Regulatory Authority published “Regulation on Renewable Energy Source Guarantee Certificate� in Official Gazette dated on November 14, 2020. The Regulation has been effective since 1st of June 2021. Its main purpose is the establishment of renewable energy source guarantee certificate system which provides the opportunity to follow, prove and disclose the source of electricity supplied to the consumers by way of certifying use of renewable energy with renewable energy source guarantee certificates and terms and conditions for impartial and transparent operation of such system with the purposes of increasing the use of renewable energy use and protection of the environment. 48. Legislative amendments are being conducted within the scope of EU Green Deal, such as Framework Regulation on Energy Labelling has been put into force on March 2, 2021 and Ministry of Trade has created a working group for the issues within the scope of EU Green Deal. 49. Project outputs have also contributed to the activities conducted by Ministry of Foreign Affairs within the scope of Chapter 27 (environment and climate change) for the accession to EU. 50. Collaboration program is expected to start between Presidency of Turkish Republic and World Bank for the development of a road map for carbon mitigation including the cost and investment requirements associated with carbon mitigation measures till 2050. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. Key Factors During Preparation Page 15 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) 51. Project objectives. At the preparation phase, gaps identified in PMR Phase I project provided the basis for PMR Phase II project. Therefore, PMR Phase II project complemented the activities that have been successfully undertaken by PMR Phase I project. PMR Phase II Project was not only in alignment with the World Bank’s Country Partnership Strategy (CPS) but also in line with the strategy documents, action plans and 11th Development Plan of Turkey. 52. Results framework and implementation support. The project’s results framework was simple and straightforward; the results indicators were clear and fully aligned with the project objectives. An implementation support strategy was developed, with technical support and training provided by the PMR Secretariat and implementation support by the Bank energy task team. Interviews with the stakeholders by the ICR mission confirmed that the implementation support strategy was carried out effectively during project implementation beyond the expectations of stakeholders. 53. Risk identification and mitigation. At the appraisal stage, risk ratings and risk mitigation measures were well considered. The Project Paper (PP) gave a Moderate rating for the overall implementation risk; a Low rating for stakeholder, governance, and social and environmental; a Moderate rating for project design, linkage to other donors, and sustainability; and a Substantial rating for implementing agency’s capacity. With respect to the stakeholder risk, the PP pointed out that impacted industries and enterprises raised concerns and objections, which could potentially expose the Bank to some reputational risk. Risk mitigation measures were identified accordingly, including through stakeholder dialogues, to ensure that all parties fully understand the planned project activities and the benefit of capacity building and technical assistance provided by the project. Interviews with the industry associations and enterprises by the ICR mission confirmed that stakeholder dialogues and capacity building successfully mitigated the stakeholder risk, and all stakeholders spoke favorably of the Bank and the benefits of the project despite concerns of potential regulatory measures or market-based instruments that could affect them. 54. Readiness for implementation. PMR Phase 2 project is the continuation of the PMR Phase I project which was completed successfully before project kick-off. Therefore, the experience gained during the first phase and the feedbacks from the stakeholder consultation provided the basis for the implementation of Phase II. In general, stakeholder consultations were scheduled before, during and towards the end of each component to ensure that stakeholder concerns adequately addressed and to allow for synergies between the studies. Such approach mitigated the project risk and enhanced readiness for implementation. B. Key Factors During the Implementation Factors outside the control of government and/or implementing entities 55. A relevant political factor was Turkey’s status under the UNFCCC and the Paris Agreement. As discussed earlier, Turkey ratified the UNFCCC in 2004 and was included in the Annex I of the UNFCCC (i.e., as a developed country). Turkey submitted its IINDC to the UNFCCC in 2015, expressing its intention to decrease GHG emissions by up to 21 percent in 2030 from the BAU level. However, within the course of project implementation, Turkey had not ratified the Paris Agreement, excusing its access to climate finance was limited given its position (Annex I) in the UNFCCC Annexes. Although this political factor did not have a direct impact on achieving the objectives of the project, the issue was brought up by some government ministries and industry stakeholders as a factor that could add Page 16 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) to the uncertainty of adopting a market-based instrument in the near future. If the Paris Agreement had been ratified then, it would have sent a clear signal and motivated the various ministries and the industries to take appropriate actions and get prepared for the implementation of carbon pricing schemes. 56. The project closing date was extended for two months with the objective of organizing Closing Conference delayed due to COVID-19 related restrictions. This extension was only concerned with the project timeline and had no budgetary implications. Due to COVID-19 measures, all stakeholder engagements after March 2020 had to be held online and delays occurred in receiving stakeholder feedbacks for the survey questions. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. Quality of Monitoring and Evaluation (M&E) 57. M&E design. The project’s theory of change is clear and solid. The measure for the outcome indicator is clear. As such, the indicator at the PDO level is very easy to measure. The description of the indicator also provides a timeline, making it time-bound. 58. PDO Indicator: Necessary framework for implementation of an ETS pilot in Turkey in place, as a result of the development of the technical, legal, and institutional underpinnings, and engaging key stakeholders by the end of project implementation period. The quantitative nature of the indicator, however, makes it difficult to assess the quality of the outputs. For example, timely completion of draft Law on Climate Change and ETS by-law for the achievement of the legislative and institutional foundations for piloting an ETS does not provide any information or insights on the quality of the draft regulations. The indicator could involve a benchmarking criterion for the quality of the outputs, such as alignment with EU acquis. However, stakeholder feedbacks received during the ICR mission regarding the quality of the outputs were substantially positive and a large team comprising of legal and technical teams from the Bank contributed to reviews. 59. M&E implementation. Project’s M&E during the implementation phase included the following: • Progress Reports: Although for an RETF yearly ISRs are required, during project implementation there was only one ISR filed in the system. However, as per the PMR rules, Implementing Country Participants are required to provide status reports on implementation to the PA. Turkey, through PIU, prepared and submitted its progress reports annually from 2019 to 2020, as per the Grant Agreement and these were reviewed and endorsed by the PMR PA. • Completion Report: Implementing Country Participants are required to prepare a completion report to ensure that objectives outlined in the MRP and the Grant Agreement are met and there is a plan for their sustainable continuation. The PIU/MoEU provided a Beneficiary Report in March 2021, and it has been stated by the beneficiary that given the completion of Phase II PMR implementation in Turkey, there is a natural continuation of the key activities of the project and preparations for PMI has already started. • Financial Statements: PMR Implementing Country Participants are required to prepare financial statements that reflect the operations, resources, and expenditures related to the activities detailed in the Grant Agreement. 60. M&E utilization. The indicators included in the results framework were consistently reported in the Page 17 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) progress reports submitted to the PMR Secretariat, including the achievements, completed tasks, outputs and arranged meetings with stakeholders for each component of PMR Phase II Project. 61. Justification of overall rating of M&E quality: The overall M&E quality is rated Substantial. The design of the results framework, indicators, and targets was fit for purpose, and the M&E implementation and utilization were found to be adequate and effective. B. Environmental Safeguard, Social Safeguard, and Fiduciary Compliance 62. This project did not finance any investments, which may have adverse impacts on the environment. The environmental category of the project is C. There was no issue relating to compliance with environment and social safeguards. 63. The procurement arrangements followed by the Ministry were generally in compliance with the Bank procedures. It has been stated in the Borrower’s ICR Report given in Annex-4 that timely execution of the project is closely linked with the timely provision of the necessary clearances by the Bank for the procurement-related documents (including the Procurement Plan, ToRs, EoIs, and Evaluation Reports). 64. Close follow-up and assistance from the World Bank team has been provided to address procurement issues on time. The project was regularly supervised by the World Bank team based in Ankara office in close proximity to the Client. The consulting services contracts financed under the grant were completed as budgeted. By the time of the grant closing, there was no major case of arbitration or dispute resettlement reported by the Ministry for the financed contracts. Procurement compliance has been Moderately Satisfactory throughout the project. It has been stated in the Borrower’s ICR Report given in Annex-4 that delay in the Grant Agreement signing and transfer of the project budget resulted in the delays for the payments of PIUs, as well as payment for the contracts with consultants. 65. Financial Management. The Project remained in compliance with the Grant Agreement covenants on financial management. The interim unaudited financial reports were submitted on time and in satisfactory content. There were no overdue audit reports during implementation. C. Bank Performance 66. Quality at entry. The Bank performance at entry is assessed as Satisfactory. PMR Phase 2 project was developed (with a grant of 2 million USD) and implemented based on the successful outcomes of the PMR Phase I project in an integrated and complementary manner for the readiness of ETS pilot in Turkey. After the successful completion of PMR projects, MoEU submitted its EoI for participation for PMI. 67. Quality of supervision. Quality of supervision is assessed as Satisfactory. The Bank’s energy GP and the PMR Secretariat were involved in providing extensive technical support during the preparation of the TORs and the review of project outputs, as requested by the MoEU. 68. The Bank’s overall performance is assessed as Satisfactory. Page 18 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) LESSONS LEARNED AND RECOMMENDATIONS 69. The PMR project was fully aligned with Turkey’s MRV legislation and efforts to harmonize with the EU ETS for EU accession. As such, there was strong buy-in from the Government, industries, and other relevant stakeholders. This critical factor has made Turkey among the most advanced countries for PMR implementation and for the sustainability of the project outcome. The development impact of the project has extended beyond the MoEU to other ministries and sectors, for example, as mentioned before, Turkish Energy Market Regulatory Authority published “Regulation Regarding Renewable Energy Source Guarantee Certificate� in Official Gazette in November 2020 and the EXIST announced the establishment of green certificate and carbon-based energy markets in their Strategic Plan for 2019-2023. Notwithstanding, it is recommended that Turkey’s experience in implementing the PMR project be disseminated more widely among the PMR implementing countries and that more efforts be made by the PMR Secretariat to enhance peer-to-peer learning. 70. Stakeholder engagement is critical for confidence building, data collection, and design and implementation of PMR policy measures. From the inception to the completion of the project, the MoEU engaged the relevant ministries, government agencies, the industry associations and enterprises at every step, requested feedback from them, and made efforts to address their concerns. Effective engagement of the stakeholders along with capacity building catering to their needs made it possible especially for the industries to keep an open mind to different policy measures, give their trust and confidence to the MoEU and the PIU, and collaborated willingly and enthusiastically in attending workshops and meetings, providing feedback, and training members of the industry associations. The strong stakeholder consultation and dialog achieved in Phase I has been even strengthened throughout the implementation of Phase II. A properly staffed PIU and a strong and effective Project Coordination are essential for stakeholder engagement and ultimately for the success of the project. 71. For recipient executed PMR projects, it is very important to build the client’s capacity on planning, procurement, management of contracts and to provide handholding on preparing TORs. Implementation delays are often a combination of planning, procurement, contract management issues. Among those, familiarizing with the Bank’s procurement rules and procedures may take time and improvement is often gradual. Therefore, there is a need from the Bank side to help the clients to make proper planning and prepare good TORs . A clear, detailed TOR is a crucial first step toward efficient hiring of consultants and implementation of respective contracts. Based on the Turkey PMR experience, it is recommended that the Bank/PMR Secretariat create a database of TORs from the completed and ongoing PMR projects and a roster of consultants and firms that can be made available on the PMR website. The TOR database and the consultant roster should be updated periodically taking into account feedback from the Bank task teams, experts, and stakeholders. The Bank team accordingly provided close hands-on and implementation support on procurement to the Ministry as needed. 72. If Turkey involves in PMI project; data collection and management should be conducted effectively with clear responsibility of parties based on the experiences gained through PMR projects. The models developed in PMR projects might be tailored to the specific needs of Turkey with the review/update of the developed model assumptions in PMR Phases and with more flexibility for sensitivity analyses needed for policy makers. Lack of required data for more detailed results and normalized benchmarks should be identified and effective collection of detailed, facility specific data Page 19 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) should be conducted especially for setting emission cap and allowances. 73. According to the feedbacks received from the stakeholders during the ICR mission, stakeholders’ trust for a fair and transparent CPI will likely increase the stakeholder involvement and data sharing. . Page 20 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: The technical, legislative and institutional foundations for piloting an ETS has been achieved. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Necessary framework for Text Framework for Necessary technical, Necessary framework implementation of an ETS pilot implementation of an legal, and institutional for implementation of in Turkey is ready, as a result of ETS not available framework for an ETS pilot in Turkey the development the technical, implementation of an is ready, as a result of legal, and institutional ETS is drafted and the development the underpinnings, through submitted to CC and technical, legal, and engaging key stakeholders Air Quality institutional Coordination Board underpinnings, through engaging key stakeholders 21-Nov-2018 21-Nov-2018 29-Jun-2021 Comments (achievements against targets): targets have been met Page 21 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) A.2 Intermediate Results Indicators Component: Technical assistance to develop the legislative and institutional foundations for piloting an ETS Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Necessary legal studies for Text Such legal studies do Necessary technical, Necessary legal initiating and operating a pilot not exist legal, and institutional studies for initiating emissions trading scheme are framework for and operating a pilot developed in collaboration implementation of an emissions trading with the CCAMCB member ETS is drafted and scheme are developed institutions. submitted to CC and in collaboration with Air Quality the CCAMCB member Coordination Board institutions. 21-Nov-2018 21-Nov-2018 29-Jun-2021 Main elements of a Climate Text CC draft Law does not Main elements of a draft Climate Law has Change Law is drafted exist climate change law is been prepared and drafted and submitted largely discussed with to CC and Air Quality stakeholders, Turkey Coordination Board announced issuing it within 2021. 21-Nov-2018 21-Nov-2018 29-Jun-2021 Carbon pricing/ETS Text Such regulation drafts Draft Carbon Regulations are drafted are not ready pricing/ETS Carbon pricing/ETS through a consultative Regulations are Regulations are process. drafted and submitted drafted through a Page 22 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) to CC and Air Quality consultative process. Coordination Board 21-Nov-2018 21-Nov-2018 29-Jun-2021 Comments (achievements against targets): Component: Establishing the technical foundations for piloting an ETS in Turkey Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Identification of an ETS cap and Text Such studies do not ETS cap and a national activities have been a national allocation plan is exist allocation plan completed completed. preparation are completed and submitted to CC and Air Quality Coordination Board. 21-Nov-2018 21-Nov-2018 29-Jun-2021 Comments (achievements against targets): Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion An ETS registry is created. Text There is no ETS ETS registry is created. an ETS registry is Page 23 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) registry created 21-Nov-2018 21-Nov-2018 29-Jun-2021 Comments (achievements against targets): Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of stakeholders Number 0.00 150.00 250.00 participated in trainings. 21-Nov-2018 21-Nov-2018 29-Jun-2021 Number of stakeholders Number 0.00 25.00 100.00 participated in ETS simulation 21-Nov-2018 21-Nov-2018 29-Jun-2021 Number of female Number 0.00 75.00 140.00 stakeholders participated in trainings 21-Nov-2018 21-Nov-2018 29-Jun-2021 Comments (achievements against targets): Component: Stakeholder Training, Consultation/Engagement and Public Awareness Activities Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Page 24 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) Number of participants Amount(USD) 0.00 250.00 560.00 attended to events and workshops. 21-Nov-2018 21-Nov-2018 29-Jun-2021 Number of female Amount(USD) 0.00 100.00 320.00 participants attended to events and workshops. 26-Nov-2018 21-Nov-2018 29-Jun-2021 Comments (achievements against targets): Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of public awareness Amount(USD) 0.00 10.00 12.00 activities and communication materials produced. 21-Nov-2018 21-Nov-2018 29-Jun-2021 Comments (achievements against targets): Page 25 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) B. ORGANIZATION OF THE ASSESSMENT OF THE PDO Objective/Outcome 1 1. The technical, legislative and institutional foundations for piloting Outcome Indicators an ETS has been achieved. 1. Identification of an ETS Cap and a national allocation plan is completed 2. An ETS Registry is created 3. Necessary legal studies for initiating and operating a pilot emissions trading scheme are developed in collaboration with the CCAMCB member institutions. Intermediate Results Indicators 4. Main elements of a Climate Change Law is drafted 5. Carbon pricing/ETS Regulations are drafted through a consultative process. 6. Number of Participants attended to events and workshops 7. Number of female participants attended to events and workshops 8. Number of public awareness activities and communication materials produced. 1. Identification of the emission cap and development of the national allocation plan have been completed 2. Development of the ETS transaction registry in Turkey has been completed Key Outputs by Component 3. Development of emission trading simulation for Turkey has been (linked to the achievement of the Objective/Outcome 1) completed. 4. Draft climate change law was finalized with wide stakeholder participation. 5. ETS by-law was finalized Page 26 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) 6. Scope of the “Development of legal infrastructure for piloting an ETS� was extended and Offsetting Communique and Auctioning Communique were developed and finalized. 7. A draft institutional framework is developed for a pilot ETS in Turkey Page 27 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) . ANNEX 2. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Percentage of Approval Components (US$M) Closing (US$M) (US$M) Technical assistance to develop the legislative and .35 .34 97.1 institutional foundations for piloting an ETS Establishing the technical foundations for piloting an 1.10 1.09 99.1 ETS Stakeholder Training, Consultation/Engagement .22 .24 109.1 and Public Awareness Activities Coordination and Expert .33 .26 78.8 Support Total 2.00 1.93 96.5 Page 28 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) ANNEX 3. RECIPIENT, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS 1) Project Success Phase-II Project: The Government of Turkey has been awarded a grant of US$2.000.000,00 from the World Bank Partnership for Market Readiness (PMR) trust fund to finance the Partnership for Market Readiness Project-Phase II (PMR Project) throughout the period of 2019-2020. The Ministry of Environment and Urbanization (MoEU) has been the lead implementing agency and the Project Implementation Unit (PIU) has undertaken the procurement and financial management tasks of the Project. The Project Development Objective (PDO) has been to assist Turkey to develop the technical infrastructure for a Pilot Emission Trading Scheme which is built on PMR Phase I outputs. In terms of Project’s relevancy to Turkey’s development goals, the activities and the objectives of Turkey’s PMR Project accord with the climate change related objectives identified within several policy and strategy documents, including the Ninth, Tenth and Eleventh Five-Year Economic Development Plans (for 2007-2013, 2014-2018, and 2019-2023 respectively), the National Climate Change Strategy Document (NCCS) (2010-2020), and the National Climate Change Action Plan (NCCAP) (2011-2023). The Project has directly contributed to meeting the two milestones listed in the NCCAP, namely the “implementation of the Climate Change Action Plan with the help of technical assistance� and “adoption of market -based mechanism for greenhouse gas (GHG) emissions.� They also fit well with some of the key legislation on energy efficiency and renewable energy, including the Renewable Energy Law of 2005, the Energy Efficiency Law of 2007, and the updated Electricity Market and Supply Strategy, approved in 2009, all incorporating the objective of climate change mitigation. Furthermore, The Project has directly contributed the targets identified in the most recent Five-Year Economic Development Plan, namely mitigating the emissions in all sectors, establishing sustainable environments and cities. The Project will contribute to achieve Turkey’s IINDC targets such as mitigation emissions and use of carbon markets. The PMR Project has been instrumental in climate change law development discussions which will be seen as a key foundation to any effort towards the development of carbon pricing instruments. Furthermore, after EU’s Green Deal announcement, PMR Turkey technical outputs has become key reference for MoEU and Ministry of Trade (MoT) in the carbon border adjustment discussions. In addition to that, it has been included in the Country Partnership Strategy (CPS) between the World Bank and Turkey and supported the CPS strategic objective of “deepened sustainable development� and the outcome of “improved supply of reliable and efficient energy, increased use of renewable energy sources and climate actions under implementation�. It should also be noted that the PMR Project complements and has important synergies with other Bank operations in Turkey. The first three installments of the Environmental Sustainability and Energy Sector (ESES) Development Policy Loan (DPL) series had a focus on the energy sector and GHG emissions, consistent with the energy, climate and environmental goals of the EU, and effectively contributed to Turkey's EU accession process. Approval of the Climate Change Strategy and Action Plan, upon which the PMR activities are built, was also a part of the DPL series. Furthermore, the Project has been synergetic with the energy sector EU/IPA Technical Assistance Project’s review of alignment of Turkey's legal and institutional framework for electricity, natural gas, energy efficiency, and renewable energy with the EU's energy acquis. Finally, some of the companies and installations within the scope of Page 29 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) the PMR activities has been sub-borrowers under the Turkey Private Sector Renewable Energy and Energy Efficiency Project (P112578) (closure date: June, 2017) credit line as well as under the SME Energy Efficiency Project (P122178) (closure date: September, 2019) credit line. Regarding efficiency, of the US$2.000.000,00 disbursed for the Phase II of the Project, US$ 1.928.927,56 was spent.9 The project completion deadline was extended once with the objective of organizing Phase-II Closure Conference due to COVID-19 crisis. This extension only concerned the project timeline and had no budgetary implications. It should be noted that the initial closure date of Phase II was December, 31 2020. However, due to COVID-19 measures all stakeholder engagements after March 2020 were held online and delays in receiving stakeholder opinion and feedback of the survey questions from sectors; an increased number of stakeholder meetings and large volume of required data and to ensure the effective designing of Closure Conference and communication outputs, it was extended until February 28, 2021. In order to ensure the timely delivery of Project activities, the MoEU staff was supported by PIU, including a Project Technical Coordinator, Financial Management and Disbursement Specialist, Procurement Specialist and a Project Assistant. The PIU composition has allowed for an efficient coordination and cross- fertilization between project. In addition to that, a senior communication expert was hired to ensure the highest level of visibility for the outcomes of the components under Phase II. Regarding effectiveness, PMR deliverables and development of the technical infrastructure for ETS, and the modelling activities, climate change law development and Paris Agreement assessment have gathered high attention from the key stakeholders, especially from the energy, industry sector and NGOs. Stakeholder engagement has been one of the key objectives of the Phase II. Particularly, capacity building workshops, simulation workshops, focus group discussions, briefing meetings, bulletins and reports have raised awareness, catalyzed data collection, understanding, and discussions about carbon pricing within the public and private sector. All activities were carried out in close coordination and cooperation with the relevant representatives from public, private sectors, academia and NGOs through workshops, meetings and one-on-one meetings. Likewise, reports were prepared in accordance with stakeholder feedbacks and recommendations. In particular, activities implemented under “Component 1� were very fruitful as the Project has drawn much attention and interest from internal and external stakeholders on the development of legal and institutional infrastructure development for piloting an ETS. On the other hand, the PMR Turkey website (pmrturkiye.csb.gov.tr), live since June 2019 has proved to be a very effective tool through which the MoEU has uploaded all World Bank and PMR knowledge products related to carbon pricing and all PMR Turkey documents, reports, presentations, and photos of the meetings to the website. The sustainability of the project is anchored in Turkey’s overall development agenda, its Climate Change Strategy and Action Plan, the EU environment acquis, climate change law development and carbon border adjustment discussions. Given these solid anchors, it is likely that the project results can be sustained beyond the lifetime of the Project. The Climate Change Law development process has already been embraced by the Presidency Office and the Minister of MoEU. Climate Change Law development is expected to continue to run indefinitely after the PMR Project is completed and be a basis of any climate 9US$1.931.191,46 was withdrawn throughout Phase I of the Project. Of that amount, US$1.928.927,56 was used and the unused excess amount of US$2.263,90 was refunded to the Bank on March 2021. Page 30 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) change mitigation policy Turkey will adopt and implement in the future. The Project has also helped inform the climate change policy decisions, and thus make a sustained contribution to the climate agenda. In particular, workshops and the final reports have provided strong initial basis and readiness to work towards alternative carbon pricing policy scenarios for the MRV sectors in a more concrete and deeper way. It should be noted that since 2012, the Ministry of Energy and Natural Resources (MENR) stated in its annual budget that it would initiate the preparatory work regarding ETS within the electricity sector, based on international experience and practice, and the PMR Turkey, through the ETS related activities, has significantly supported the MENR with such preparatory work and capacity building. The ETS workshop and the final reports have provided strong initial basis and readiness to work towards alternative carbon pricing policy scenarios for the MRV sectors in a more concrete and deeper way. In addition to that EMRA published a “Renewable Energy Certificate� in November 2020, which could be seen as a first step for MBI implementation to support renewable energy in Turkey. Component 1: Developing the draft legal and institutional infrastructure for piloting an ETS in Turkey: Sustainable development is an important policy priority for the Turkish government as expressed within the Eleventh Five-Year Development Plans; it is also aligned with Turkey’s EU accession strategy. Achieving sustainable development through green growth has been emphasized as a policy priority in the three recent Five-Year Development Plans. To that end, Turkey’s Climate Change Action Plan includes a range of actions necessary for establishing a carbon market in Turkey. They include, inter alia, monitoring and reporting of GHG emissions in all key sectors, identifying GHG reduction potentials and cost curves, and making legal and institutional arrangements needed to establish a carbon market. However, only legislative regulation for carbon pricing in Turkey is MRV regulation which is adopted in May 2014. As part of that effort, it is decided that this component should contribute and complete the legal and institutional infrastructure for a pilot ETS in Turkey to complete the carbon pricing legal framework in Turkey. To that end it is planned to draft a Climate Change Law which allow MoEU to implement an ETS. In addition to the Law, draft secondary legislations namely ETS by-Law, auctioning communique and offsetting Communique were developed. In addition to the legal framework, structure of the Climate Change and Air Quality Coordination Board is reorganized for an effective governance of climate change policy development, international negotiations and carbon pricing implementation. Efficiency: Initial budget amount: US$350.000,00 Actual amount spent:US$337.768,03 All draft legal framework under this component were completed by December 2020. Draft legal framework consisted of 4 legislations and one institutional framework. Legislations are; draft climate change law, draft ETS by-law, draft Auctioning Communique and Draft Off-set Communique. Institutional framework is to govern climate change policy development and operate carbon pricing scheme namely ETS in Turkey. The level of local experts’ understanding of the Turkey’s legal system and hands-on experience has been important not only for the developing the Turkey specific legal framework but also to build trust between Page 31 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) the stakeholders and get their inputs. At the beginning of the component, knowledge on the climate change law and required infrastructure for carbon pricing was limited. This issue was addressed through the workshops, roundtable discussions and capacity building workshops which proved to be very useful, especially at the drafting stage. In order to increase the level of understanding on climate change and carbon pricing legal framework, the MoEU decided to provide the general public and the stakeholders with more detailed information, including case studies and applicable implementation examples from other countries. As part of this effort, the MoEU developed videos and social media posts. Efficacy: The MoEU started climate change law and carbon pricing legal framework and institutional structure development for the first time under the PMR Turkey Project. As part of the legal framework development, 4 draft legislation and operational structures for climate change governance and ETS were developed. Additionally, bulletins for the stakeholders, workshops and roundtable discussions were organized. The workshops were not limited to capacity building for the stakeholders, but also they were crucial for the building of good relations between the MoEU, other ministries, the private sector, NGOs, and academia. Considering that the Turkey does not have any long-term plan for emission reduction other that INDC, the legal framework discussions were especially beneficial for building a discussion platform between the parties. Particularly for NGOs and academia. It was the first time they were involved in the PMR studies and provided feedback, especially draft climate change law. Furthermore, Minister of Environment and Urbanization Mr. Murat Kurum announced Turkey’s plan to fight against climate change in February 2021. He stated that Turkey start discussions for adopting a climate change law in the parliament in 202110. Component 2: Improving the technical foundations for piloting an ETS in Turkey: Under its INDC, Turkey has announced its intention to reduce its GHG emissions by up to 21% relative to a ‘business as usual’ scenario by 2030. Turkey has been investigating the feasibility and potential outcomes of a market-based instrument as a means to help meet this target, and more broadly to support the decarbonization of the Turkish economy. As of today, no political decision has been taken on the introduction of a market-based instrument (although as part of EU accession discussions, Turkey is planning to consider harmonization of primary and secondary EU ETS legislations). However, Turkey has been undertaking analytical work, particularly through the PMR that is intended to inform the suitability of different market-based instrument options. In that regard, this component Conducting technical infrastructure studies for piloting an ETS in Turkey, (i) Identification of the emission cap and development of the national allocation plan; (ii) Development of the ETS transaction registry in Turkey; (iii) Development of emission trading simulation for Turkey; (iv) Assessment of Article 6 market mechanisms of the Paris Agreement and options for Turkey. The outputs of this component included the studies below: 10 https://webdosya.csb.gov.tr/db/turkce/faaliyetler/-kl-mdeg--s--kl-g---20210217102133.pdf Page 32 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) - Identification of the emission cap and development of the national allocation plan (completed in November 2020): The project aims to develop an emission trajectory between the years 2020 to 2035 with modelling. In the model 6 sectors were modelled in TIMES-MACRO. These sectors are electricity production, primary and secondary steel production, cement production, paper and pulp production and refineries. Rest of the MRV sectors were projected with off-model analysis. Afterwards, an ETS cap and national allocation plans for each MRV sector were developed which covers more than 50% of whole emissions in Turkey. 14 different scenarios were analyzed in TIMES-MACRO model to find the optimum ETS design. - Development of the ETS transaction registry in Turkey (completed in October 2020): The project aims to develop a web-based software for ETS transaction registry and was finalized with the delivery of the registry source code. The objective of the software is to establish a platform with fundamental functionalities of a registry system. The scope of the designed solution includes the following; (i) Authentication and authorization, so that users can safely log in the system, and access the appropriate information according to their role and account(s), (ii) Transfers of units between accounts (owned by installations and trading institutions), (iii) Surrender of units by factories in order to comply for their emissions, (iv) Delete units, (v)Unit holdings in accounts; each user shall have access to his/her account(s), which will present the units held by the account, (vi) The solution will be translatable to Turkish via translation files. Thus, the user interface will be available in both languages, namely English and Turkish. - Development of emission trading simulation for Turkey (completed in August 2020): The objective of the assignment is to build the necessary technical and institutional experience behind an ETS, across both private and public actors. A simulation tool will benefit ETS policy makers and administrators as it will demonstrate that program results are driven by design choices made by the government. It will also impact industries and other stakeholders by building capacity and offering a grounded understanding of choices and impacts when interacting with an ETS. The simulation has Turkey specific projection data and sector structure. It runs on the web browsers and does not need a specific software installation. The simulation aims to increase firms’ familiarity with the concepts and mechanics of emissions trading; enhance capacity across the private sector and within individual participating companies; and enrich public-private discussions with regards to the implementation of emissions trading in Turkey. The software provided policymakers and stakeholders with a better understanding of ETS and virtual ETS experience. - Assessment of Article 6 market mechanisms of the Paris Agreement and options for Turkey (completed in December 2020): The objective of the assignment is to assess the impacts of the future carbon markets to Turkish economy with two scenarios; first Turkey’s ratification of PA and not ratification. Within the framework of the project, an economic model was developed and PA’s impact on the Turkish economy were analyzed. Alternative negotiation strategies for Turkey were developed. Efficiency: Initial budget amount: US$1.100.000,00 Actual amount spent: US$1.090.594,92 Page 33 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) All studies were completed by December 2020. This component consisted of four contracts and aimed at raising awareness on carbon pricing policies within the public and private sector and Improving the technical foundations for piloting an ETS in Turkey. The international experience and the leadership of the international experts were essential not only for the smooth implementation of project operations but also to build trust between the stakeholders. Feedbacks of the stakeholders and as well as data gathered from them were important pillar of the accuracy of analysis. In order to facilitate the data gathering and comment receiving from the stakeholders, capacity building workshops, and 1-1 meetings were organized throughout the project. Furthermore, draft analytical reports were sent to stakeholders to get their comments on the outcomes. It can be concluded that, outcomes of the studies were not only based on desk review of the experts but also based on the outcomes of the stakeholder engagement. In order to increase the level of understanding on carbon pricing, the MoEU decided to provide the general public and the stakeholders with more detailed information, including case studies and applicable implementation examples from other countries. Furthermore, MoEU has legal copy rights of the ETS simulation software and ETS registry. Especially ETS simulation could be used to increase the capacity on carbon pricing in private, public sector as well as universities. Efficacy: The studies carried out within the scope of Identification of the emission cap and development of the national allocation plan included extensive 1-1 meetings and data gathering rounds. At the end of the fata gathering period, “Data Availability and Quality Report� was presented to the stakeholders to show the status and importance of the data gathering process. Stakeholders familiarized with the data gathering process and report could be used as a guidance for data gathering in their future studies. Likewise, the simulation work has drawn much attention from stakeholders. In 2020, 5 workshops were organized and stakeholders had chance to experience ETS in a virtual environment. For the first time stakeholder could see the practical implementation of the ETS. Paris Agreement work also provided a good discussion platform for stakeholders since ratification of the PA was then under consideration in Turkey. Analytical studies provided under this project fed the high- levels for their decision making process. Component 3: Stakeholder Training, Consultation/Engagement and Public Awareness Activities: This component included (i) conferences, workshops, and trainings to support the activities under Components 1 and 2; (ii) consultation meetings with stakeholders; and (iii) public awareness activities (media, high-level public/private meetings, etc.). Efficiency: Initial budget amount: US$ 220.000,00 Page 34 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) Actual amount spent: US$242.570,88 The stakeholder engagement activities progressed in line with the development of the analytical work and the PIU worked towards organizing the roundtables which targeted more specific capacity building needs of stakeholders. It should be noted that since the Climate Change Department is one of the departments within the MoEU which has a heavy workload due to having both a national and an international climate change agenda and several projects, a number of meetings overlapped and the PIU had to organize some back-to-back meetings due to time limitations. All stakeholder meetings in 2020 were held online due to COVID-19 measures. Efficacy: As part of this component, several roundtable discussions were organized, and extensive capacity building and feedback workshops on ETS were provided. These stakeholder engagements were very critical not only in terms of extracting the required information and views from representatives of relevant sectors, but also in terms of enabling participants to gain deep knowledge about the topics. It should be highlighted that the activities under this component resulted in stakeholders demonstrating a high ownership of the project. Another point worth mentioning is that as the scope of the Project expanded, the meetings and the workshops expanded as well to include a diverse group of stakeholders which further enriched the development of the climate change law and outcomes of the analytical studies. At the same time, an important lesson-learned was that it was crucial to bring together the same people as much as possible from different institutions, firms, and backgrounds, having the capacity to provide professional insights, engage in fruitful discussions and convey the key concerns. On that note, the stakeholders have expressed their satisfaction and appreciation with being included in these activities and having the opportunity to learn on such technical topics with the support of international experts. The roundtable discussions organized for climate change law and data gathering for ETS cap should also be highlighted as they have allowed for a good discussion platform and data/feedback gathering from stakeholders. More specifically, the activities carried out within the scope of the development of a “: Developing the draft legal and institutional infrastructure for piloting an ETS in Turkey� were a great success as the stakeholders stated that they significantly benefitted from climate change law development discussions. The level of participation, attention, and contribution was particularly high which in turn provided both the MoEU and the Project with a broad and active stakeholder base, also to be reached out to in other relevant projects. The main public awareness activities carried out throughout Phase II were: ➢ Engagement of stakeholders: Several meetings and events in order to support developing the communication strategy of PMR Turkey were conducted between 2018 and 2021. The main objective of the meetings was gathering inputs for the communication strategy of PMR Turkey. ➢ The first stakeholder meeting was held with MoEO executives on March 29th 2018 in Ankara. As a Page 35 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) result of this meeting, SWOT11 analysis of carbon pricing mechanisms and related perceptions among key stakeholders was developed. Training on effective communications was also delivered within the scope of this meeting. ➢ The second stakeholder meeting “Climate Change Summit� including a panel discussion with the 200 C level participants12 from large scale enterprises (carbon intensive industry) in the private and financial sectors in coordination with World Bank, PMR, Capital and Economist magazines. was held on April 12th 2018 in Istanbul. Climate Change Summit was organized with the aim of sharing PMR outcomes and creating awareness on 18 April 2018 Main participants of the meeting were high level public officials, CEOs and media representatives. In total 200 participants were attended to the meeting. Opening speech of the summit was given by the Minister Mehmet Ozhaseki. Two discussion panels were organized on carbon pricing and climate risks with business perspective. The main focus of the first panel was pioneer of the carbon management and green climate finance. The panelists were CEOs of the leading private banks in Turkey. The main focus of the second panel was turning climate risks into opportunities for Turkish business and the panelists were CEOs of the leading holdings in Turkey. Finally, the closure speech was given by the Deputy Minister and Chief Negotiator of Turkey Prof. Dr. Mehmet Emin BIRPINAR who emphasized on the carbon pricing instruments in his speech. ➢ A media training module on climate change and carbon pricing was designed and conducted for the Deputy Minister and Climate Change Envoy of the Republic of Turkey on April 14 th 2018 in Istanbul. A Q&A session on carbon pricing was conducted during the simulated media training. ➢ The supplementary magazine on climate change and carbon pricing in colloboration with Capital and Ekonomist, which are among the most respected, high-circulation magazines, were printed and reached a 60,000-strong readership including key stakeholders and the general public in June 2018. ➢ Two OECD videos on carbon pricing were adopted and screened during the stakeholder meetings. ➢ The 60 second trailer on climate carbon pricing was produced in April 2018 prior to the third stakeholder meeting. ➢ A documentary film including short interviews on carbon pricing with representatives of public, non-governmental and academic institutions as well as financial and private sectors was produced in December 2018. ➢ The third stakeholder meeting, attended by high level excecutives from the relevant public institutions, was held on November 27th 2018 in Ankara. ➢ The Conference and Closing Ceremony of the 1st Implementation Phase of PMR was attended by over 200 participants from all key stakeholders including public institutions, the private sector, 11 SWOT Analysis is to assess organization's and/or policy’s current position before deciding on any new strategy. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a SWOT Analysis is a technique for assessing these four aspects of business, organization and/or policy.. 12 C-level are the top executive or highest level corporate positions in a company. For example, a CEO (Chief Executive Officer) holds a C-level job. Other C-level job titles include CTO (Chief Technology Officer), CFO (Chief Financial Officer), CIO (Chief Information Officer). Page 36 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) non-governmental organizations, academia and media on December 19th 2018 in Ankara. The event was opened with a speech by Guven Islamoglu, TV journalist and producer, who specializes in environmental and climate change issues. Panel discussions on the 1st Phase of PMR Turkey were held with representative of industry, academy, government and public institutions. ➢ The fourth stakeholder meeting with participants from private sector was held on November 11th 2019 in Istanbul. ➢ The fifth stakeholder meeting with participants from academia, non-governmental organizations and media was held on November 12th in Istanbul. ➢ The sixth stakeholder meeting, attended by representatives of public institutions, was held on November 29th 2019 in Ankara. ➢ As a result of these stakeholder meetings, PESTEL analysis was completed in December 2019. PESTEL analysis clarifies the relevant national context and communications decisions including the values and priorities of the targeted audiences, the design of statements and narratives. ➢ The communication strategy of PMR Turkey development efforts and studies were presented as case study in the Carbon Pricing Communications Training which was conducted on 13 and 14 February 2020 in Istanbul. ➢ The communication strategy of PMR Turkey was finalized in April 2020 and implementation of it started in October 2020 with recruitment of the Communication Consultant. ➢ Due to pandemic circumstances stakeholder engagement meetings with the representative of public and government institutions, carbon intensive industry and academy were held virtually between October 2020 and February 2021. ➢ Two short videos were produced and screened at the Closing Conference of PMR Turkey Second Phase on January 27, 2021. One of them was about the climate change and carbon pricing and another one was included the short interviews on climate change, PMR and carbon pricing with the representatives of primary stakeholders. ➢ Closing Conference of PMR Turkey Second Phase was held with more than 360 participants from government and public institutions as well as industry, academy, and media on 27 January 2021 virtually. Şahika Ercümen, the World record holder in free diving was attended to the closing conference with a speech on climate change impacts to the nature as the key note speaker. Two panel discussions on PMR Turkey outputs were held. Short videos on PMR and interviews with stake holders were also screened during the closing conference. ➢ Media Trainings: Two of trainings were designed and executed for high-level policy makers within the MoEU and relevant government institutions for media engagement and debate techniques on carbon pricing on 28 December 2020 and 13 January 2021. Two of one-to-one trainings with General Director of Environmental Management and Deputy Minister of MoEU and Climate Change Envoy of Turkey are conducted in February 2021. ➢ Sponsored TV Program: The sponsored 45 minutes of TV program “Passport� in cooperation with NTV was produced and broadcasted on the 5th and 6th of February 2021. TV program was prepared and presented by Mete Çubukçu. The program was mainly focused on: o Climate change and its impacts; Page 37 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) oCarbon pricing and its co-benefits in terms of emissions, health, and jobs; oRevenue use; and oIntegration of carbon pricing with other policies (e.g., clean air, low-carbon economy, etc.). ➢ Targeted print / electronic media supplement: The targeted print and media supplement was produced in cooperation with Doğan Burda Media Group. 28 pages and 28.000 copies of print supplement were distributed with February 2021 issues of Capital and Ekonomist Magazines.. The headline of print / electronic supplement was “Climate Change� and prepared with the objectives of creating public awareness on climate change and PMR among primary target audiences defined in the PMR Communication Strategy. The activity also aim to complement and support policymaking efforts and studies while Turkey is deciding on the best carbon pricing mechnisms in line with the national interests and needs. It helped with building broad-based support and generating valuable feedback for formulating and adopting the ETS in Turkey. The interviews with the representatives of carbon intensive industries, financial institutions, government institutions (Ministry of MoEU and MoT) and civil society are conducted by the editorial team of relevant magazines. The logo of the Ministry of Environment and Urbanization, the World Bank and PMR were placed on the front cover. At least 80,000 downloads of electronic versions of the supplements were enabled at www.capital.com.tr and www.ekonomist.com.tr . ➢ Production of audio-visual materials for social and digital media: The objective of this service was to communicate to the Turkish public for ensuring and increasing awareness about climate change, carbon pricing, energy transformation, green energy, etc. The messages/contents for social media platforms – twitter, linkedln, youtube and Instagram- of MoEU, the World Bank and PMR were developed and audio-visual material including visual, video, infographic and motion picture were produced between October 2020 and February 2021. 40 posts accompanied by at least a visual or a video were developed. These were posted in PMR Turkey’s website and social media accounts as well as social media accounts of MoEU in February 2021. Component 4: Coordination and Expert Support for the Implementation of MRV and MBIs: Efficiency: Initial budget amount: US$330.000,00 Actual amount spent: US$257.993,73 The Project activities were supported by a Project Implementation Unit (PIU) including a Project Technical Coordinator, Financial Management and Disbursement Specialist, Procurement Specialist and a Project Assistant. As noted above, the PIU composition has allowed for an efficient coordination and cross- fertilization between project activities especially on modeling and carbon leakage issues. In addition to that, a senior communication expert was hired to organize the communication activities. Page 38 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) Efficacy: The PIU has engaged with the key stakeholders from the early stages of the project, and maintained the same level of engagement for each specific activity. Stakeholder meetings not only helped the MoEU staff increase the level of ownership and attention towards the project, but also provided very useful inputs for the PIU to formulate the activities and the related TORs. Very positive feedbacks were received from different sectors and institutions on how the MoEU has been inclusive and open for comments, which has helped raising both the credibility and profile of PMR Turkey Project. 2) Administrative Performance and Lessons Learned and Future Recommendations for PIU and WB Staff capacity for design, tendering and implementation Consisting of a Project Technical Coordinator, Procurement Specialist, Financial Management Specialist and Project Assistant, the size of the PIU was at the optimum level, providing for a successful Project implementation. Given that the Project requires an effective distribution of work based on different fields of specialization, it is important that the PIU composition remains unaltered, including the four positions mentioned. Both the Ministry personnel and the PIU gathered important lessons learned from Phase II. The PIU was based at the Ministry during Phase II which turned out to be crucial for the effectiveness of Project execution. The Project activities that remain outside of the governmental procedures can be implemented rapidly; however, the bureaucratic procedures often take time. By being physically present at the Ministry, the PIU was able to closely monitor internal administrative procedures and intervene where necessary to minimize delays in implementation. It should also be noted that the background of the Ministry focal point for the Project has played an important role in the successful execution of the Project. Phase I has showed that it is essential that the Ministry focal point has experience in project supervision, and has a vision and understanding of project cycle management. Designing the assignments: Throughout Phase II, the Ministry worked with sophisticated and knowledgeable consultants, mainly due to the well-prepared ToRs. Experience shows that preparation of ToRs makes up a crucial aspect of the procurement stage not only for ensuring effective communication between the Ministry and the consultants, but also in terms of determining the scope of the work and expectations of both sides. In that regard, the World Bank should provide the technical support during writing of the ToR documents proves to be vital. Another important lesson learned is that the ToRs should be written carefully in advance and in as much detail as possible, since it is extremely difficult and time-consuming to amend RFP documents upon receipt of Technical and Financial Proposals from the consultants. It also gets in the way of the manipulation of reference documents in negotiations with the consultants, speeds up the process and Page 39 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) ensures that the sides are able to understand each other more clearly. Execution of the assignments: One of the most important factors that played a role in the success of the Project was the fact that the negotiations with the consultants were administered well. In addition to that, starting the activities with kick-off meetings provided the Ministry and the consulting firms with a platform to discuss and decide upon the best methodology. Furthermore, through these meetings the stakeholders had a chance to meet the experts of consulting firms, be informed about the project implementation and principles, and prepare their calendars for future activities from the start. While it was important to be in regular contact with the consultants, the active involvement of the Ministry focal point in project implementation was especially crucial as it ensured that both the stakeholders and the Ministry personnel received regular information and feedback on the progress of the Project. On the other hand, the most important factor consolidating the confidence of stakeholders in the Project, and thus accounting for the effectiveness of Phase II, was the workshops which were structured and designed well in advance. A significant lesson learned in that regard is the fact that the Project activities should be designed as the ToRs are drafted. In addition to that, throughout Phase II defining the specifications of the experts and the workshops on time played an important role in the participation of key stakeholders in workshops which has become the face of the PMR Program. World Bank should provide the technical support for reports prepared under project components. Structure of workshops and inclusiveness One of the key successes of the Program was the inclusive approach of the Ministry in terms of engaging as many stakeholders as possible and integrating their views in the work provided for increased commitment and participation. As the topics and cases were built upon one another, the continuity of stakeholder engagement and attendance proved to be very critical for the effectiveness of the workshops. Translation services and proofreading Since the original outputs of the work was in English, the effective transfer of knowledge depended on translation services ultimately. In that regard, it was vital to avoid loss of meaning when translating the reports from English to Turkish. This highlighted the importance of allocating sufficient time and budget for the translation of documents and proofreading which has formed an integral part of Project activities. WB Guidance and assistance to PIU staff for design, tendering and implementation As noted above it was difficult for the Ministry to recruit a Procurement Specialist having expertise in the procurement of goods, services and consultants in line with the World Bank guidelines. To overcome this issue, the World Bank can carry out capacity building activities both for the Ministry personnel and the consultants via procurement related trainings and workshops. Page 40 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) During Phase II, for the drafting of ToRs, the Ministry managed to learn about the experiences of other PMR countries and received recommendations and information on related activities through personal efforts and contacts which has costed time and energy. Hence, it is recommended that the World Bank creates a pool of ToRs that already implemented in other countries, experts or consultants who would be accessible to provide technical feedback and support when necessary to ensure smooth flow of information and experience sharing. Visibility of the Project The visibility of the program could be administered more easily and effectively if PMR had visibility guidelines. Particularly, the bulletins turned-out to be less effective than expected in terms of capturing the interest of stakeholders. This was in part due to the fact that the Ministry did not have the necessary capacity for administering the production of bulletins which was later on carried out more easily by the consultants. Another important point to be made on visibility is that it was essential to include a Communication Expert in PIU and develop a communication strategy, especially for the organization of the high-level events. Particularly, it was important to keep the PMR Turkey website updated given that it was visited by a wide range of stakeholders. Page 41 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) ANNEX 4. SUPPORTING DOCUMENTS (STAKEHOLDER FEEDBACKS DURING THE ICR MISSION) Institution/Company/Person Feedbacks received PIU technical coordinator -The two month extension (which was provided to all PMR countries by WB) is not due to the delay in project activities but rather for the effective organization of closing conference -The expectations of all stakeholder have been met. -Due to the virtual nature of meetings, more meetings could have been arranged. - The scope is extended and the extended scope has been timely completed without any additional budget requirement INDUSTRY Arçelik -All outputs have been achieved. -Stakeholder involvement and engagement were outstanding. -Turkey is not benefiting from the financial opportunities due to the lack of Ratification of Paris Agreement -2100-2200 companies should have been involved in MRV system but this number is around 700 currently which creates distrust to the overall system. Paper and Cellulose -This project is the best project we have ever involved in terms of Foundation stakeholder communication and engagement. -Activities have been performed with enthusiasm and great motivation -Feedbacks from all stakeholders have been received for drafting legislation -Some data could not be shared due to the violation of Competition Law. Data should be received from facilities one by one. Enerjisa -The consultants involved in PMR project had great motivation, excitement and enthusiasm. -Data collection issue is very challenging and sensitive issue. The data already available in databases of Public Institutions should have been used. Cement Industry -The quality of project management was well above the expectations -Draft Climate Law implicitly provides deep insights for the policy makers -The companies generating power from waste are benefitting from incentives (feed-in tariffs) unlike cement industry. -European Cement Association has preparations to for zero carbon policy by 2050 -There should be an incentive mechanism for the investments used to reduce emissions (by the Ministry of Industry and Technology) -Support from international consultants was very beneficial Page 42 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) -All the feedbacks have been taken into consideration -The data within the MRV system should have been used -We had some hesitation for the submission of detailed data -The investments have already started to reduce carbon emissions -The companies who have already made investments for emission reduction should be provided with incentives (or the emission reduction targets should be differentiated) -Alternative fuels are also being used in addition to coal or petrocoke TÜPRAŞ -The stakeholder involvement and engagement was high. -We also need to be well prepared for Green Deal -The companies with substantial value creation should be protected. Glass Industry -Emissions’ calculation and verification is very sensitive and critical issue -Market operations of ETS systems should be conducted in a fair and transparent manner -Project management and workshops were outstanding -Normalized sectoral benchmark should be conducted TUSIAD -Carbon market should be created. 2 reports have been published by TUSIAD about carbon markets. -An integrated system/approach should be in place (ETS is just a subcomponent of the integrated system (green deal; net zero carbon targets; circular economy etc.) -Public institutions have all kinds of data which should have been utilized -Preparation of a long term road map for carbon based instruments in an integrated manner is more important than the ratification of Paris Agreement Association of Energy -The best project we have ever involved in terms of project Produces management -All the stakeholders actively involved in the project -Base load power producers should continue to exist; restrictions set by Paris Agreement should also consider the need for base load in power mix, since base load is strongly needed without the existence of grid storage Association of steel -We have been very satisfied with the project, ETS simulation producers studies were very beneficial -The models developed for steel production should be amended (increased share of integrated facilities has been assessed by the model developed rather than the deployment of arc furnace) Page 43 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) CONSULTANTS ERCT (European Roundtable -Significant amount of time has been spent for the project on Climate Change and -The establishment of the institutional framework was important Sustainable Transition) task (that was the missing piece) -Staying out of Paris Agreement will be very costly for Turkey -Article 6 of Paris Agreement and its implications have been assessed. -We observed active involvement of stakeholders and variety of stakeholder groups -Turkey should take the advantage of carbon finance and climate finance -Pressure on Turkey will be higher in the coming period and Turkey will find a very difficult position in next COP Unisystems -Linking study has been conducted based on the experience of Switzerland and UK -User account management will be the center of PMI project -Trusted account and transactions, security measures, support for issuance, support for auctions and compliance cycle and network topology will be critical elements. -All outputs have been achieved and the stakeholder involvement was high. Ricardo -Detailed feedbacks from wide variety of stakeholders have been received via smaller and technical meetings -The stakeholder involvement was high -All outputs have been achieved. Vivid Economics -All the expected outputs have been delivered -Covid crisis had a negative impact in terms of communication with stakeholders. -Lack of necessary data was the main bottleneck for the models for the cap setting and allowance allocation. -Marginal Cost of abatement could not be determined during PMR Phase 1 due to lack of necessary data -MRV data already available in the database of MoEU should be used in PMI project. -One country model needs to be developed. -Carbon border adjustment should also be incorporated into the model in PMI project. MARKET OPERATORS/REGULATORS Borsa İstanbul -According to the feedbacks received from stakeholders, EPIAS is supported to be the market operator. In that case, Borsa İstanbul can provide all kind of support to EPIAS - The project was very beneficial with highly involvement and engagement of variety of stakeholders Page 44 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) EPİAŞ -The feedbacks from the stakeholders have taken into account during the implementation of project -Borsa İstanbul has a 30% share in shareholder structure of EPIAS -Spot markets can be operated by EPIAS while the derivative markets are within the responsibility of Borsa İstanbul -Since the responsibility for the oversight of the market is given to Capital Markets Authority (SPK), Borsa Istanbul was also considered as the market operator for the integrity of the operations EMRA -PIU was very successful in terms of project management -The project was negatively affected from the pandemic in terms of effective communication -Focal points can be selected from the related institutions for the enhancement of coordination -Information sharing was perfect during the implementation of the project ACADEMICIANS Prof. Dr. Erinç Yeldan -Bottom up energy model and top down econometric models have been adopted. Legislation studies were quite successful -During the PMI phase, the impacts of carbon pricing on the economy should be modelled with a broader perspective -Long term zero emission strategy should be adopted -Zero emission target should be claimed by Turkey and Turkey should not be left alone in climate diplomacy -The outputs of the project could not have been better under the current conditions -The reports prepared are rich in content -The team working for modelling activities should be clearly set. -Modelling activities should be conducted transparently with the clear explanation of assumptions and data sources Prof. Dr. Kemal Sarıca -Public institutions showed a resistance to the project during PMR PHASE I. -Steel and cement producers are conducting internal meetings to specify their position in the project -Facility based data is required for benchmarking -Objections to the model results achieved by some of the stakeholders were experienced. -If the electricity sector is not involved in ETS, the carbon prices might be higher since the electricity sector is net seller while the industry sector is net buyer -The responsible party for data collection should be specified in a way to include at least 2 ministries Prof. Fikret Adaman -According to the results of the surveys conducted, the level of awareness regarding the issues such as carbon market, carbon tax is low. The awareness raising activities should be conducted. -The involvement of “Ministry of Finance and Treasury� and Page 45 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) “Ministry of Energy and Natural Resources� has been not sufficient -The government is not showing strong commitment for the adoption of carbon pricing instruments Prof. Dr. Ebru Voyvoda -Single country model has been developed. EU ETS should also be included in the model -Impact of different carbon prices on different sectors has been analyzed. The model is developed by Vivid economics. The carbon price is estimated as around US Dollars 25 per ton of CO2-eq emission from the single country model -Sensitivity analysis has been conducted for different parameters -Forecasted foreign prices have been received from Bloomberg data by ERCT -A transition in electricity sector seems necessary to avoid negative possible impact on economic development -If the transition is managed well, Turkey might be a net seller till 2030 -However, marginal abatement costs are not still known even though this was one of the objectives of PMR Phase I -Implementation of Article 6 is crucial -More in-house know-how is needed for the technical analysis tools PUBLIC INSTITUTIONS Presidency of Turkish -the consultants of the project were highly qualified Republic -the support of all public institutions is crucial for PMI phase -the assumptions behind the models used for projections should be questioned -Collaboration program will start with World Bank for the development of a road map for carbon mitigation and the cost and investment requirements associated with carbon mitigation measures till 2050 (including the preparations for the 12th development Plan) - developing country status should be given to Turkey instead of developed country status within the scope of negotiations for the ratification of Paris Agreement. Otherwise, Turkey will not be able to benefit from the funds such as Green Climate Fund. In addition; developed country status may also bring restrictions within the scope of Article 4 of Paris Agreement (absolute emission reduction targets) which seems not possible according to the projections developed. Ministry of Industry and -Project was very useful; many of the studies required have been Technology fulfilled by this project -As the Ministry, we are in close contact with the iron, steel and cement industries -Ministry of Trade has created a working group for the issues within the scope of Green Deal. Ministry of Industry and Technology is also Page 46 of 47 The World Bank Partnership for Market Readiness 2 Project (P168730) a member of this working group. -National incentives are provided for the investments such as energy efficiency, reuse of wastes etc. -Legislative amendments are being conducted within the scope of Green Deal, such as Regulation on Energy Labelling has been updated. -They are also working on the possible extension of restrictions for cement and steel industries within the scope of “Carbon Border Adjustment� -Incentives cannot be provided for steel and iron industries as per EU Acquis -Climate Change and Air Pollution Board has ongoing discussions about “zero emission� targets. Ministry of Foreign Affairs -The works within the scope of Chapter 27 (environment and climate change) for the accession to EU are ongoing. -All the legislation should be in compliance with EU Acquis -The project was successful but Covid negatively impacted the second phase. -EU has set targets for 55%emission reduction till 2030 and zero emission till 2050 -A regulation is expected to be put into force in June 2021 related to Carbon Border Adjustment -The sectors with higher priority with respect to the negotiations with EU should be highlighted in the projects Ministry of Trade -The project was beneficial -Outputs of the project has satisfied the expectations -ETS seems to be more reasonable CPI considering the integration with EU -All related sectors should be included in the projects Page 47 of 47