As of October 1, 2023, the Carbon Border Adjustment Mechanism (CBAM) transition period has officially commenced. The transition period, which started on October 1, 2023, will be completed on December 31, 2025. The transition period requirements include the mandatory calculation and reporting of carbon footprints per product for carbon-intensive products imported from sectors such as iron, steel, fertilizer, cement, and electricity. Companies exporting to the EU are expected to report and submit their product carbon footprints on a quarterly basis.
In summary, according to the report on the Potential Impact of the Carbon Border Adjustment Mechanism on the Turkish Economy, the mechanism will require authorized importers in the EU to deliver “CBAM certificates” reflecting the carbon price of embedded emissions in carbon-intensive products imported to the EU. The CBAM certificate price is expected to mirror the EU ETS price, and CBAM financial obligations are projected to be gradually implemented in line with the schedule for the phase-out of free allocations in the EU Emission Trading System, starting from 2026. (Imogen Long, 2023)
On the other hand, it may not seem feasible to trade the certificates purchased under CBAM for the sake of price stability. CBAM certificates are expected to impose various responsibilities on producers in other countries in terms of financial obligations. The trading of CBAM certificates could lead to a series of legal debates and sanctions.
Starting from 2026 or 2027, carbon fees will be collected under the CBAM based on the EU Emission Trading System. Considering Turkey’s export volume of iron, steel, cement, and aluminum to the EU, it is evident that CBAM has a dominant potential impact on the Turkish economy.
According to the Updated First National Contribution Statement of the Republic of Turkey, renewable energy sources account for 54% of the installed capacity of energy supply for electricity generation in Turkey. Increasing the capacity of renewable energy-based electricity production will directly benefit Scope 1 and Scope 2 emissions in the energy and industrial sectors. (Çevre, 2023)
From another perspective, CBAM’s impact is undeniable for suppliers involved in the supply chain of carbon-intensive products that do not have a direct export relationship with the EU but are part of the supply chain of imported carbon-intensive products. Considering the impact on carbon pricing of Scope 3 emissions in the value/supply chain, the preference for low-emission producers will be one of the possible outcomes of CBAM.
REFERENCES
Çevre, Ş. v. (2023). Türkiye Cumhuriyeti Güncellenmiş Birinci Ulusal Katkı Beyanı.
Imogen Long, C. I. (2023). Potential Impact of the Carbon Border Adjustment Mechanism on the Turkish Economy.
