Introduction

The European Union took an important step in 2023 to combat climate change and achieve its carbon neutrality targets: Carbon Border Adjustment Mechanism (CBAM). This mechanism was designed to ensure fair competition in the import of carbon-intensive products and reduce the risk of ‘carbon leakage’. Companies exporting to the EU are now obliged to report the carbon emissions generated during the production process of their products and undertake a financial obligation in the following years.

So, which companies does CBAM oblige?

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Transition Period: 2023-2025

CBAM entered the transition period as of 1 October 2023. During this period, no payment is received from companies; however, there is a reporting obligation for companies operating in the sectors within the scope.

Under the transition period, companies exporting to the EU in the following sectors must report the embedded emissions of their products:

• Iron & steel
  
• Cement
  
• Aluminium
  
• Fertiliser
• Hydrogen
  
• Electricity

In this process, importers sending goods to the EU should calculate the carbon footprint of products in co-operation with their suppliers and report it to the EU in quarterly reports.

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Final Period 2026 and Beyond

As of 1 January 2026, CBAM will be fully operational. From this date onwards:
- Importers will not only have to report, but also assume financial liability for embedded emissions in imported products by purchasing CBAM certificates.
- In some sectors, only direct emissions (e.g. iron and steel, aluminium, hydrogen) will be covered, while in some sectors both direct and indirect emissions (e.g. cement, fertiliser) will be included in the reporting.

This means new costs and obligations, especially for industrial companies exporting from Turkey to the EU.

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What is expected in the future?

The EU plans to extend the scope of CBAM until 2030. This includes

• Chemicals
  
• Petroleum products
  
• Industrial gases
  
• Other energy intensive sectors can also be included in the system. Thus, CBAM will be in parallel with the EU Emissions Trading System (EU ETS).

There are also ‘de minimis’ simplifications for companies importing small volumes. For example, simplified processes can be applied for some businesses that send products under 50 tonnes/year.

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Conclusion

CBAM means a reporting obligation for exporting companies in the short term and a financial obligation in the medium and long term. This regulation is now a necessity for companies operating in the iron and steel, cement, aluminium, fertiliser, hydrogen and electricity sectors.

Companies exporting to the EU in Turkey should already start carbon footprint measurements, establish reporting infrastructures and be prepared for certification costs in the post-2026 period. Otherwise, loss of competitiveness will become inevitable.

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Bibliography

European Commission. (2019). The European Green Deal. Brussels.
European Commission. (2023). Carbon Border Adjustment Mechanism (CBAM). Brussels.
GHG Protocol (2015). Corporate Accounting and Reporting Standard. Washington, DC.
TSE (2018). ISO 14064-1: 2018 Standard. Ankara.
EBRD. (2024). Green Economy Financing Facility (GEFF) in Turkey. London.