Tax Incentives Provided for Green Bonds in Financing of Energy Efficiency and Its Importance for Turkey

Abstract

Energy efficiency is of vital importance for Turkey as one of the elements of sustainable development. Turkey is faced with difficulties in providing sustainable development due to its dependence on imported energy. In addition, the impacts of climate change have a negative effect on Turkey’s environment and economy. Turkey is therefore involved in international efforts to combat global climate change and reduce greenhouse gas emissions. As for many countries, financing of energy efficiency is also a significant issue for Turkey. As an alternative to financing energy efficiency, green bonds are developing rapidly all over the world. Green bonds are financial instruments that provide opportunities for investors to participate in the financing of “green” projects that help reduce the negative impacts of climate change and adapt to the impacts of climate change, reduce CO2 emissions, prevent environmental pollution, and improve social welfare.These structures have important effects on the realization of sustainable development. Turkey’s first and only green bond was issued by the Industrial Development Bank of Turkey in 2016 and attracted investors’ attention.Countries such as the US, China and Chile apply tax incentives for green bonds to attract investors. However, level of awareness of green bonds in Turkey is low and there are no tax incentives yet. Necessary measures should be taken to facilitate financing of energy efficiency in Turkey and tax incentives should be implemented for green bonds. In this paper, the development and types of green bonds in the world and Turkey, tax incentives provided for green bonds in financing of energy efficiency in the world and Turkey, and recommendations for Turkey were discussed.