Transparency as a Key Prerequisite for the Success of Energy Subsidy Reform: A Case Study of Tax Subsidies in Turkey

Abstract

During the 2009 Pittsburgh Summit, G20 leaders recognized the harmful effects of inefficient fossil fuel subsidies on markets and the environment, and committed to “rationalize and phase out over the medium term inefficient fossil fuels subsidies that encourage wasteful consumption.” To achieve this commitment, Turkey and other G20 member countries need to make parallel efforts to reform their domestic policies. However, national governments must share a more-or-less common understanding to define, measure and evaluate fossil-fuel energy subsidies for the success of the subsidy reform. Otherwise, this commitment could be negatively impacted by creating an opportunity to hide subsidies. The OECD contributes to these parallel efforts with statistical studies providing transparent and accurate estimates of budgetary support and tax expenditures to fossil fuel producers and consumers in many countries, including the G20. However, the OECD measurement method requires identifying and evaluating individual countries’ fossil-fuel subsidy policies. The OECD collects and assembles the information mainly from publicly available government sources. Thus, adequate national transparency rules are a prerequisite for the accurate measurement of fossil-fuel subsidies leading to successful international efforts. This study aims to demonstrate the extend to which national transparency rules impact the evaluation and definition of domestic fossil fuel tax subsidies by external agencies by using a case study of Turkey.

Keywords: Fossil fuel tax subsidies, energy subsidy reform, transparency

JEL Classification: H23, K32, K34