Turkey's Nearshoring Boom: Economic Growth and Environmental Costs

Turkey has emerged as a significant hub for businesses seeking to establish supply chains close to Europe and Central Asia, driven by its skilled workforce and low energy costs. In 2025, Turkey surpassed Germany as Europe's largest power polluter, with power firms emitting more carbon dioxide (CO2) due to the country's rapidly increasing energy demands. Between 2019 and 2024, Turkey's electricity demand rose by 14%, contrasting with a decline in overall European electricity demand during the same period. This shift highlights the environmental consequences of nearshoring, as production capacity has increasingly moved to Turkey from other regions.

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Turkey's appeal to manufacturers is bolstered by its significantly lower electricity prices, which have declined due to government subsidies. In late 2024, household electricity prices in Turkey averaged around 5.5 euro cents per kilowatt-hour (kWh), compared to Germany's 28 euro cents/kWh. This cost differential has led to a notable increase in Turkey's production of energy-intensive commodities such as cement and chemicals, while German production of these items has contracted. The trend indicates a strategic shift in manufacturing capacity from Germany to Turkey, driven by the latter's favorable energy costs.

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The rapid industrial growth in Turkey raises concerns about environmental sustainability. As Turkey's production of both energy-intensive and higher-value products increases, so too does its pollution output. The reliance on European markets for consumption poses additional risks, particularly in the event of economic downturns in Europe, which could reduce demand for Turkish goods. Despite these challenges, Turkey's strong logistical connections to the Middle East and North Africa provide alternative markets, potentially mitigating some economic risks.

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Critics argue that Turkey's industrial expansion comes at a significant environmental cost. The country’s status as a major CO2 emitter raises questions about its long-term sustainability and commitment to climate goals. Environmental groups have expressed concern that the influx of manufacturing could lead to increased pollution levels, undermining efforts to combat climate change.

Reuters

Officials in Turkey have emphasized the economic benefits of nearshoring, highlighting job creation and increased production capacity. Jean-Marc Gales, CEO of Wrightbus, noted that repowering existing diesel trucks with electric powertrains is a cost-effective strategy for decarbonization, reflecting a broader trend in the transportation sector. However, the Turkish government faces pressure to balance economic growth with environmental responsibilities.

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As Turkey continues to attract businesses seeking lower production costs, the environmental implications of this growth will remain a critical issue. Policymakers will need to address the challenges of pollution and sustainability while fostering economic development. The future of Turkey's industrial landscape will depend on its ability to innovate and implement cleaner technologies, ensuring that economic gains do not come at the expense of environmental health.

Reuters