Turkey faces a problem that is common to many developing countries: a growing economy and a growing demand for energy.  By 2030, electricity consumption is expected to rise from 240 TWh to over 600 TWh. Turkey plans a huge increase in coal-fuelled power generation to fill the gap. But would it be cheaper to use renewable energy instead?

To answer this question the Global Subsidies Initiative conducted a study to add up the full costs of generating power with coal, the full costs of generating power with renewables and then compare the two. The analysis included: the cost of existing subsidies to each energy source; the cost of generating electricity at the power station; the cost of each technology; and the cost to society of environmental and health externalities.

As regards subsidies, the study found that Turkey spends upwards of US$ 730 million on subsidies to the coal industry every year. The study contains the most comprehensive account of coal subsidies in Turkey to date. This figure does not include 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. Renewable subsidies also exist in Turkey in the form of a feed-in tariff. However, due to the low level of the tariff for wind projects, 70% of renewable energy generators decided to decline the tariff in 2014 and sell their output on the market instead.

As regards environmental and health externalities, the electricity from coal is costly due to associated particulate emissions that cause respiratory diseases. Likewise, carbon emissions have a cost to society, based on the impacts associated with climate change.

When all factors are considered, the study concludes that renewables are already cheaper than coal. Electricity from wind power is half the cost of electricity from coal. Solar power is marginally cheaper than coal (see Figure 1). The cost of renewable energy is on a long-term downward trend, so renewable energy is likely to become even cheaper in the future.

If we accept the premise that costs of environmental damage and public health should factor into government decision-making on the right energy technology, then the case for action seems clear: the removal of subsidies to coal and the removal of other barriers to renewable energy. As a G-20 country, Turkey has already committed to phasing out inefficient fossil-fuel subsidies, so such an approach would be well aligned with its existing policy commitments.

International experience shows, however, that reform must be carried out carefully. Policy-makers must typically balance economic and environmental impacts with the social impacts of reform. The coal industry 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.

Despite the challenges of reform there is a clear case for eliminating fossil-fuel subsidies and moving towards more sustainable electricity systems.

The full study, Subsidies to Coal and Renewable Energy in Turkey, is freely available from: http://www.iisd.org/gsi/subsidies-coal-and-renewable-energy-turkey