Attempts at common agreements to phase out fossil fuel subsidies (FFS) have been increasing, as the topic generated momentum through the Rio Dialogues prior to the 2012 United Nations Conference on Sustainable Development (Rio+20) and following the Paris Agreement in 2016. This study quantifies the magnitude and the relative importance of FFS in the Turkish economy and produces a relevant national FFS synthesis for policy design. FFS form a complex system of a self-contradictory nature that stands in stark contrast with the Turkish government’s statements regarding sustainable development. Based on available data from the 2000s, we find that Turkey provides state support for coal and the exploration of oil and natural gas that represents roughly 0.2 percent of its nominal GDP per year. Continuing to subsidize fossil fuels narrows down the fiscal options that could otherwise be used to support cleaner technologies and mitigation actions. Given the fact that fossil fuels have significantly negative implications for the environment and health, eliminating those subsidies has the potential to help combat environmental pollution, climate change, and related problems.

International negotiations for an agreement to reduce the emission of greenhouse gases have not produced cost-effective policies for reducing emissions, not least because they are unlikely to prevent ‘leakage’ through a re-location of carbon-intensive activities to poorer countries. An alternative or supplementary approach that is more likely to achieve at least some emission reductions, and at the same time generate national and global economic benefits rather than costs, involves lowering coal subsidies and trade barriers. Past coal policies have encouraged excessive production of coal in a number of industrial countries and excessive coal consumption in numerous developing and transition economies. This paper documents those distortions and outlines the circumstances under which their reform (currently under way in some countries) could both improve the economy and lower greenhouse gas emissions globally. It then quantifies the effects on economic activity as well as global carbon emissions, using the G-Cubed multi-country general equilibrium model of the world economy. Both the gains in economic efficiency and the reductions in carbon dioxide emissions that could result from such reforms are found to be substantial—a ‘no regrets’ outcome or win–win Pareto improvement for the economy and the environment.