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Supply Chain Crisis and Lessons for the Green Transition - Onurcan Mısır

As the global economy was happily preparing for the post-Covid recovery, the crisis began. Shortages of transport, energy cuts, ships waiting off the coasts to unload goods... Even though one should put a big portion of the blame on the trade war between the U.S. and China (the U.S. restrictions on SMIC, China's biggest chip manufacturer), it is the pandemic conditions that made things worse. Factories closing down or not producing at their full capacity led to less production, while the financial aid distributed to workers that had to stop their work increased demand. Interestingly, the whole situation can be said to be a trial of what expects the global economy when the green transition takes its long-awaited place.

The implementation of this transition will clearly mean a tremendous effort that must be undertaken for the future of our planet. However, it is also clear that green production will mean more costs and processes even after the first phase of transition. It will mean an increase in the demand for certain minerals that are difficult to obtain, high-capacity batteries, and semiconductors. According to the preliminary paper regarding the green transition in the context of supply chains published by the European Parliament Liaison Office in Washington DC, ‘An electric vehicle requires six times more critical minerals than a conventional car, while an onshore wind power plant requires nine times more critical minerals than a comparable gas-fired plant’. While all these concerns about increased demand for certain types of resources will definitely put pressure on producers and their scarcity will mean an increase in the prices, temporary solutions to fix similar issues which happened due to the pandemic has failed. The attempt to rescue the public from the economic burden by distributing money led to more inflation, which was already high due to the lack of production. The Guardian has reported that in September, Germany has seen its highest inflation rate in 30 years, with a 14% rise in energy prices. Even without any kind of effort to completely alter the means of production, this latest crisis affected almost all sectors that were critical for the livelihood of the global society. Thus, it is clear that our familiar methods of governing the economy and production will be futile in the years to come.

An equally overriding emphasis must be put on the foreign policy that accompanies the economic policies. Many of the minerals and technological devices that will be critical in the green transition process are extracted or produced in Asia, with the biggest producer being China. Considering that even the latest supply chain crisis that had nothing to do with the ecology intensified due to the chip shortage, a result of the U.S. restrictions on China, the climate issue clearly won’t be solved until the West decides what to do with the Chinese economy. In order to solve further possible problems, one must either work to strengthen ties with China or find other producers to endorse the transition process. Also, ties with China can also help to solve the crisis that is already underway. Protection and endorsement of already present supply chains will clearly mean a safer world, however, one can also find other recipes if one wants to be prepared for the worst-case scenario.

Countries with a bridge-like geological location such as Turkey and Ukraine can play a huge role both in the solving of the supply chain crisis, and in minimizing the costs of the green transition. For they are the ones with the biggest potential but also the most conflictual environment, ensuring their security with the cooperation and commitment of all of their neighbors will add a lot to the safety of the supply chain. Furthermore, Turkish means of production, in particular, is in a very viable situation to ensure the green transition. Since it lacks a widespread heavy industry but is also not completely unindustrialized, it can both serve as a model for green transition and be prepared to produce the necessary commodities in a green future if the necessary moves to transform the industry are made.

In short, even though the global economy was totally unprepared for the post-Covid supply shock underway, and this shock presents an alarming prequel for the green transition, now we know what issues to tackle first. There are many ways to learn from our mistakes and transform accordingly. Chinese question and the quest for undertaking production for hard times can not be fully solved without reference to each other, just as environmental transformation can not be tackled without reference to both. Hopefully, the crisis will serve as a wake-up call to transform our economies, industries, and foreign policies with a broad perspective.

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