Turkey’s Coal Subsidies Equaled US$730 Million in 2013

GENEVA—27 March 2015—Turkey is spending upwards of US$730 million in subsidies to the coal industry, according to a new report by the International Institute for Sustainable Development (IISD).  This is despite the fact that renewable energy is already cheaper than coal when external costs, such as health and environmental damage caused by burning coal, are taken into account.  

The study contains the most comprehensive account of coal subsidies in Turkey to date. It comes at a time when public and private institutions are under mounting pressure to stop investing in coal mining companies.

“Subsidies for coal lock in coal power for another generation when renewable sources of energy are less costly for society in economic, social and environmental terms,” said Sevil Acar, Assistant Professor at Istanbul Kemerburgaz University and author of the report.

The US$730 million figure does not even count subsidies under the Turkish government’s “New Investment Incentive Scheme,” which provides tax breaks and low-cost loans to coal projects, so the true figure is likely to be even higher. The government is planning to triple generation from coal by 2030.

The study compares the costs of coal to wind and solar energy and found that when environmental and health costs are taken into account, electricity from wind power is half the cost of electricity from coal. Solar power is also marginally cheaper than coal. The cost of renewable energy is on a long-term downward trend, so renewable energy is likely to become even cheaper in the future.  

“This study provides further evidence to support the case for eliminating fossil-fuel subsidies once and for all,” said Peter Wooders, director of IISD’s Energy program. “As a G20 country that has already committed to phasing out inefficient fossil-fuel subsidies, this is a call to action for Turkey.”

The report is one of an ongoing series of papers by IISD’s Global Subsidies Initiative that quantify and evaluate subsidies for fossil fuels.

Just over half of Turkey’s subsidies are used to provide coal to low-income households. While these serve the important goal of improving energy access, they come at a high health cost and are no replacement for social security programs. The study recommends a gradual phase-out of these subsidies in favour of more efficient measures to support access to energy and support social welfare.

Coal also remains a significant employer in many areas, and any moves away from coal use would need detailed planning to ensure that affected communities can benefit from compensation measures and additional job creation from new technologies.

Download Subsidies to Coal and Renewable Energy here: http://www.iisd.org/gsi/subsidies-coal-and-renewable-energy-turkey

For more information please contact Sumeep Bath at sbath@iisd.org or +1 (204) 958 7740 (in Canada) or Damon Vis-Dunbar at dvis-dunbar@iisd.org or +41 22 917-8848 (in Switzerland).

Notes for editors

• The study found that subsidies to coal were equivalent to around US$0.01 to US$0.02 per unit of electricity (kWh) in Turkey.

• The main coal subsidies in 2013 were :

  • The provision of coal to poor families of nearly US$392.3 million

  • Direct payments to the hard coal industry of around US$298.47 million

  • US$24.36 million of subsidies for fossil-fuel exploration

  • US$13.86 million to support new coal power plants

  • Around US$2 million to rehabilitate existing coal power stations

• On top of these, numerous subsidies were provided under the government’s “New Investment Incentive Scheme” provides subsidies for coal-related investments in the mining and power generation sectors. These subsidies include exemptions from VAT and customs duty; reductions in income tax; support for social security premiums; land allocation; and interest support. It has not been possible to quantify this package of measures, but the total is expected to be significant.

• Renewable energy projects can also receive subsidies in the form of feed-in tariffs. However, the available rates are not high enough to be attractive. In fact, in 2014 most wind projects (70%) opted out of the scheme and decided to sell their power on the market.

• The study estimated the cost of power generation, subsidies, costs of health and environmental impacts. The total costs for each technology in 2014 were:

  • Coal US$0.264 /kWh

  • Wind US$0.12 /kWh

  • Solar US$0.255 /kWh

• Renewable energy technologies are expected to become cheaper as technological learning reduces costs and increases efficiencies. It is estimated that by 2030 wind will be cheaper than coal in Turkey on a purely financial basis, and that, when either health or environmental costs are taken in to account, solar will also be significantly cheaper.