No Turkish delight

Cheap Russian coal, macroeconomic disarray, and the EU's carbon border levy

Welcome to Carbon Risk — helping investors navigate 'The Currency of Decarbonisation'! 🏭

If you haven’t already subscribed please click on the link below, or try a 7-day free trial giving you full access. By subscribing you’ll join more than 3,000 people who already read Carbon Risk. Check out what other subscribers are saying.

You can also follow my posts on LinkedIn. The Carbon Risk referral program means you get rewarded for sharing the articles. Once you’ve read this article be sure to check out the table of contents.

Thanks for reading Carbon Risk and sharing my work! 🔥

---

Estimated reading time ~ 6 mins

Turkey has experienced several severe climate events over the past few years, including wildfires in 2021 that scorched over 1,700 square kms of the Mediterranean coastline, a severe heatwave in the summer of 2023, followed by record rainfall and flooding.

The proportion of the country’s territory considered to be at high risk of severe climate events is projected to increase from 25% currently to 40% by 2050, according to Jupiter Intelligence. It means that by mid-century ~35 million people are expected to be living in areas at high risk of heat waves, flooding, and droughts.

Sufficient incentive you might think to spur an investment boom in decarbonising the country’s power system and industrial base. Alas, Turkey finds its attention focused on resolving its own domestic economic turmoil, and at the centre of geopolitical forces buffeting the region in the aftermath of Russia’s invasion of Ukraine.

Turkey’s economy has been plagued by a currency crisis (down 37% in 2023) and soaring inflation (averaging ~65% in 2023) as the country’s unorthodox economic policies pummel investor confidence. In response to the crisis, power generators have favoured cheap coal imports, particularly from Russia, over more expensive LNG. The EU’s decision to ban coal imports from Russia in August 2022 meant heavily discounted Russian cargoes became even more attractive to countries such as Turkey, desperate for cheap fossil fuels.¹

Turkey generated 118 TWh of power from thermal coal in 2023, overtaking Poland (97 TWh) to become the second largest coal-fired generator of electricity in Europe as cheap coal helped fuel the country’s power plants. If current trends continue Turkey is likely to overtake Germany (121 TWh) by 2025 and become the largest coal-fired generator in Europe, according to analysis by the think tank Ember.

Over the past decade, Turkey’s share of electricity generated from burning thermal coal has risen from 25% to 36% in 2023, as newly commissioned power plants increased demand for coal. In contrast, coal’s share of power generation in the EU has slumped to 12% as countries increasingly switched to natural gas, while also ramping up their renewable energy generation capacity.