Carbon Border Adjustment Mechanism (CBAM): A New Era for Turkish Companies

Climate change has become a top priority for governments and the private sector worldwide. The European Union's (EU) latest initiative, the Carbon Border Adjustment Mechanism (CBAM), affects not only European companies but also all countries exporting to the EU. This regulation has the potential to deeply impact global trade, production, and consumption.

For Turkish companies, understanding how to adapt to this new regulation is essential. What exactly is CBAM? Which products fall under its scope? Which sectors in Turkey will be most affected? And most importantly, how can companies prepare? This guide answers these key questions.

What is CBAM?

The Carbon Border Adjustment Mechanism (CBAM) is a new EU customs regulation designed to fight climate change. It imposes a financial obligation based on the carbon footprint of imported products from non-EU countries. Importing companies are required to monitor and reduce the carbon emissions of these products.

The mechanism ensures a level playing field between EU-produced goods and imports from third countries. By accounting for the carbon costs of imported products, CBAM prevents foreign producers from gaining an unfair advantage due to weaker climate regulations outside the EU.

EU Climate Strategy and Carbon Limits

The EU goes beyond reducing emissions within its borders. Through the European Green Deal and the Fit for 55 initiative, the EU aims to:

• Gradually reduce free emission allowances in the EU ETS sectors.

• Ensure fair competition between EU producers and foreign companies without emission control systems.

• Prevent carbon leakage by keeping carbon-intensive production from relocating outside the EU.

CBAM’s main goal is to prevent carbon leakage and maintain the competitiveness of EU industries while encouraging global emission reductions.

How CBAM Works

Initially, CBAM applies to energy-intensive imports, including:

• Iron and steel

• Cement

• Aluminum

• Fertilizers

• Electricity

• Hydrogen

Key points of CBAM’s operation:

• Imports will be assessed based on their embedded carbon emissions.

• Carbon pricing will be applied at the border for non-EU products.

• Products from countries with existing carbon pricing systems may receive partial or full exemptions.

• Reporting obligations will be introduced for importers, requiring verification and submission of carbon data to national authorities.

A transition period (Oct 1, 2023 – Dec 31, 2025) allows companies to prepare. Full CBAM implementation is planned for January 1, 2026, including verified direct and indirect emissions and associated financial obligations.

Products and Sectors Covered

CBAM initially targets energy-intensive sectors, but over time, additional products and sectors will be included. Companies exporting to the EU should closely monitor whether their products fall under the CBAM scope.

Key affected sectors in Turkey:

• Iron and steel

• Aluminum

• Cement

• Chemicals and petrochemicals

• Energy-intensive manufacturing

These sectors will bear the highest carbon-related costs under CBAM and should prioritize emission reduction investments.

Implications for Non-EU Countries

CBAM creates a new external trade dynamic:

• Non-EU countries exporting to the EU may face additional carbon costs.

• Countries with carbon pricing systems equivalent to the EU may receive exemptions.

• The mechanism encourages countries to adopt robust climate policies aligned with the EU’s carbon targets.

Exemptions:Some countries and regions, such as Iceland, Liechtenstein, Norway, Switzerland, and certain special territories, are initially exempt. However, exemptions are conditional and subject to review, particularly by 2030, to ensure alignment with EU emission targets.

Turkey’s Position and Readiness

Turkey is a key EU trade partner, exporting over 40% of its goods to the EU and ranking 6th among EU exporters. To benefit from exemptions and avoid additional carbon costs, Turkey must:

• Develop a carbon pricing system parallel to the EU ETS.

• Update climate targets in line with EU expectations.

• Ensure domestic producers comply with CBAM reporting and verification requirements.

Turkey has committed to increasing its Nationally Determined Contribution (NDC) target to 41% emission reduction, and ongoing efforts include the National Emissions Trading System (ETS) and alignment with EU CBAM regulations.

How Turkish Companies Can Prepare

1. Carbon Footprint Assessment

• Establish systems to accurately calculate direct and indirect emissions.

• Ensure calculations comply with internationally recognized standards.

• Verify reports through accredited organizations.

2. Reduction Strategies

• Implement energy efficiency measures.

• Transition to renewable energy sources.

• Reduce embedded carbon in production and supply chains.

3. Financial Planning & Risk Management

• Incorporate potential carbon costs into pricing strategies.

• Develop budgets for potential CBAM-related taxes or penalties.

• Integrate ETS revenues into green investments.

4. Sustainability & Green Transition

• Use CBAM compliance as an opportunity to strengthen brand value.

• Adopt best practices and collaborate with experts.

• Establish internal training and reporting systems to support the green transition.

Conclusion

The EU’s CBAM is a critical step in achieving net-zero targets and reducing global emissions. For Turkish companies, preparation is key:

• Accurate carbon accounting

• Strategic emission reduction plans

• Compliance with EU reporting and verification requirements

• Integration of sustainability into corporate strategy

Carbon Gate can assist companies in navigating the CBAM compliance process with expert guidance, ensuring smooth reporting, verified emission data, and alignment with EU regulations.

Start preparing today to safeguard your competitive edge, contribute to a sustainable future, and reduce your carbon footprint with Carbon Gate by your side.