Environmental impacts of coal subsidies in Turkey: A general equilibrium analysis

In this study we aim at providing an analytical framework for Turkey to study the macroeconomics and environmental impacts of the existing coal subsidization scheme. To this end we develop a regionally differentiated applied general equilibrium model spanning over 2015–2030. Our analytical apparatus focuses exclusively on the fiscal implications as well as the environmental repercussions of the removal of the subsidies on greenhouse gas emissions. With the aid of a set of alternative policy scenarios against a "business as usual" path, we study the regional and sectorial performances of growth, employment, investment and capital accumulation, consumption/welfare and trade balance. Our results indicate that by simple elimination of the coal subsidization scheme, Turkey can reduce its aggregate gaseous emissions by as much as 5% without a significant loss in its GDP. - Highlights: • Turkey supports the coal sector providing both production and investment subsidies. • Eliminating production subsidies leads to a 2.5% decline in total CO2(eq) by 2030. • Additionally, removal of regional investment subsidies reduces CO2(eq) by 5.4%. • The macro-effects of both scenarios are found to be quite small. • Coal subsidies could be transferred to the financing of green policy alternatives.