Writer: Avjin Aktop
Preventing climate change has long been attributed to taking concrete economic measurements and amendments in the laws of countries. Especially incentivizing renewable energy sources that are highly costly to implement is of high importance in transforming from fossil fuel-dominated industries to eco-friendly ones, specifically aiming for a zero-waste world. Since this kind of investment is generally conducted in developed countries that have stable economic growth such as Germany and the UK, prejudgements about whether to invest in renewable energy in recession times are prevalent, deepening further the climate crisis day by day. This paper particularly will analyze the reasons why Turkey, a country that has been in the depth of a currency rate and debt crisis for years, should invest in renewable energy sources in the middle of its shrunk economy.
In order to specifically propose a foundation for incentives, we should consider Turkey's conditions beforehand. Turkey has long struggled to attain a stable economy and long-term economic growth due to its political conflicts and controversial international relations. The ongoing crisis is characterized by high inflation, rising borrowing costs, and correspondingly rising loan defaults, as well as the Turkish Lira (TRY) plunging in value as a result. Although some actions could be taken such as rising interest rates by ensuring the independence of the Central Bank and legal system, the president’s unorthodox views about interest rates further exacerbate the conditions: annual inflation rate skyrocketed to 83% in official terms, and 183% according to ENAG, an objective inflation research organization. Whether to invest in renewable energy in this kind of deteriorated scene is of high significance to inquire about.
Firstly, what is renewable energy? According to the United Nations, it is “the energy derived from natural sources that are replenished at a higher rate than they are consumed.” Sunlight and wind are renewable sources since they are replaced at a higher rate than they are consumed. On the other hand, fossil fuels are non-renewable sources that take hundreds of millions of years to restore. Since these fuels create harmful greenhouse gas emissions, transitioning to renewable energy is essential to addressing climate change.
But why should Turkey invest in renewable energy even when it is sinking into stagflation? Because as Adam Smith theorized the liberal capitalism and implied once, recessions are the best period of time to invest. Yet, what makes Turkey specifically suitable and best for investing right now?
As mentioned above, Turkey is experiencing high inflation rates. Inflation is essentially the increase in the price level of goods and services year-over-year. Most often, it is the result of overheating the economy: when capital and labor are used beyond their capacity, inflation occurs, which in turn increases prices and unemployment, and decreases the purchasing power of salaries. Since the purchasing power of the loans taken out will erode away due to high inflation, it is better for demanders to borrow in this period of time. Interest rates in loans are generally less than the monthly inflation rate, meaning it is always profitable for investors to even take out loans in this period. Loans are the basis for investment; therefore, it is best to invest in renewable energy which is costly to implement but profitable in the long term.
Governments launch new programs to combat the challenges that economic crisis brings, and Turkey is no contrary to that. The government tries to get the country out of recession by discounts on certain taxes, less interest is taken out of loans that encourage farming and for those who would like to set up their own businesses with the help of development plans. It is better to benefit from these plans while transforming from already established businesses to more eco-friendly ones and building new ones profiting from them.
Last but not least, reasons to invest in renewable sources are countless despite continuing fossil fuel usage. The reason for the continued usage of fossil fuels is because it is abundant and cheap to use at the current time, and not because we have no other alternative. Renewable energy is at a disadvantage to other forms of energy, because of high initial costs and lack of skills and technology, which all could be solved with a high amount of capital investment. After then, utilizing renewable energy in businesses and households will cover much of electric bills, the highest common expenditure. Also, they may be protected from price fluctuations, which are rooted in many parameters and is possible to occur at any time. Since customers, being aware of the climate crisis, are attracted to shop or cooperate with eco-friendly companies, receiving energy from renewable sources may indirectly affect businesses’ profits positively.
As of consequence, Turkey, although in a deep economic crisis, should invest in renewable energy even to escape deepening the crisis. It is highly efficient and profitable to invest at this time since inflation is higher than interest rates, attracting investors.
Sources:
1. What is renewable energy? (n.d.). United Nations. https://www.un.org/en/climatechange/what-is-renewable-energy
2. Carson Schwalbach. (2016). How Renewable Energy Benefits Businesses and the Environment. University of Nebraska - Lincoln. https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1194&context=envstudtheses
3. Emily Folk. (2019, February 8). - 10 ways renewable energy can save businesses money - Renewable energy magazine, at the heart of clean energy journalism. Renewable Energy Magazine, at the heart of clean energy journalism. https://www.renewableenergymagazine.com/emily-folk/10-ways-renewable-energy-can-save-businesses-20190208