ZERO EMISSIONS IN TRADE: IS CARBON-FREE EXPORT POSSIBLE?

The CBAM, which is reshaping the rules of global trade, aims to prevent carbon leakage and protect the competitiveness of carbon-conscious investors

One of the most important regulations implemented by the European Union (EU) in line with its goal of becoming the first “Net Zero Continent” by 2050 is the “ Carbon Border Adjustment Mechanism (CBAM).” The CBAM, which is reshaping the rules of global trade, aims to prevent carbon leakage and protect the competitiveness of carbon-conscious investors.

WHAT IS CBAM? HOW WILL IT AFFECT TURKISH EXPORTERS?

The main goal of CBAM is to prevent carbon leakage. In other words, it aims to prevent companies operating in countries outside the EU from producing cheaper goods and entering the EU market.

CBAM, set to be fully implemented by 2026, aims to tax imports from carbon-intensive countries into the European Union based on the carbon emissions of the relevant products. Initially covering the iron and steel, aluminum, cement, fertilizer, electricity, and hydrogen sectors, this mechanism will eventually affect a much broader range of industries. According to the regulation, EU companies importing from outside the EU will be required to pay a carbon tax to the EU if the average carbon emissions of the country they import from exceed the average of the equivalent sector in the EU.

In addition, the carbon tax to be paid will be transferred directly to the EU by the importing companies, and these revenues will be used in the European Union’s green transformation projects. This situation represents a critical turning point, especially for Turkish companies exporting to the EU. While the competitiveness of companies that cannot achieve carbon-free production will weaken, export costs will inevitably increase.

SO, IS TÜRKİYE READY FOR THIS TRANSFORMATION? IS CARBON-FREE EXPORT POSSIBLE?

An important detail: companies exporting to the EU will be required to measure and report their carbon emissions.

In fact, CBAM means the following for Turkish exporters:

• Exporting products with a high carbon footprint to the EU will be very difficult.
• The risk of being subject to carbon pricing will necessitate the production of low-carbon products and investments in emission reduction.
• The Green Transition is already inevitable for companies selling to the EU market; however, this transition must occur much more quickly.

TÜRKİYE’S GREEN TRANSFORMATION ROADMAP

Türkiye ratified the Paris Climate Agreement in 2021 and set a target of net zero emissions by 2053. In line with this target, the Climate Law was adopted, and the Green Deal Action Plan continues to be implemented with determination. Türkiye, one of the first countries in the world to make sustainability reporting mandatory, is also continuing its Green Taxonomy work. As one of the world’s 20 largest economies, the “Green Transformation” process in Türkiye is multifaceted and progressing rapidly.

Under the Climate Law, companies are required to transparently measure their carbon emissions in their production processes. This application is critical for both compliance with the CBAM and access to sustainable financing sources. Meanwhile, the use of renewable energy in industry is also rapidly spreading. As of today, renewable energy sources account for over 60% of our total installed energy capacity. Integrating sources such as solar and wind into production processes directly reduces the carbon footprint while significantly enhancing the competitiveness of our industrialists.

Certificates proving that products are low-carbon will undoubtedly provide a competitive advantage in both the EU market and other developed economies. At the same time, investing in technologies that increase energy efficiency and reduce emissions is no longer a choice but a necessity. Banks and financial institutions now want to allocate resources to low-carbon investments. Companies that meet ESG (Environmental, Social, and Governance) criteria can access affordable financing more easily.

In conclusion, CBAM is giving rise to a new trade regime and competitive framework, a completely new ecosystem. Carbon-free exports are now the name of the game. Turkish exporters will either transform themselves in this new order or be left out of the game. This path also presents great opportunities for companies that adapt early and place sustainability at the center of their strategy. The fact is that leadership in green transformation will not only benefit the environment, but also our country’s economy, directly serving our country’s goal of becoming a major economy.

THOSE WHO DON’T TRANSFORM IN INDUSTRY WILL LOSE: 44% OF EXPORTS AT RISK AFTER 2026 WITH CBAM

In 2024, Türkiye’s exports to the European Union amounted to approximately $109 billion, accounting for 41.4% of total exports. In the same year, total exports in sectors covered by CBAM amounted to 26 billion dollars, with 11.7 billion dollars of this amount destined for EU countries. Based on these figures, it is understood that 44.3% of our exports under CBAM are directed toward the European Union.

If our country is not ready for the CBAM:

• The average carbon cost may vary between 75-100/CO2 per ton.
• Carbon footprint-based preference systems in the EU market may push exporters without low-carbon product certification out of the supply chain.

For unprepared companies:

• Market loss,
• Increased costs,
• Loss of access to sustainable financing options will be at risk;

For transforming companies:

• Strengthening their position in the EU market,
• Access to sustainability-labeled investment funds,
• Achieving long-term competitive advantages will become possible.

It should not be forgotten that carbon-free exports are no longer a choice, but a new requirement for competitiveness. 2026 is no longer a distant future; therefore, it is crucial to quickly complete preparations for investments, carbon accounting, green certifications, and technological transformation.

CBAM: THE MOST CONCRETE TRANSITION RISK FACING TURKISH INDUSTRIALISTS

CBAM is not just an environmental regulation for Turkish exporters; it also stands out as one of the most concrete and costly climate transition risks they face. In 2024, exports of iron and steel, aluminum, cement, fertilizer, electricity, and hydrogen products to the European Union accounted for 4.5% of total exports, with 44.3% of exports in these sectors destined for EU countries. Among the sectors, aluminum stands out with the highest export rate to the EU at 57.2%, while the lowest rate is observed in the cement sector at 20.8%. These indicators reveal that the sectors in question are highly dependent on the EU market under the CBAM and are directly affected by the regulation.

It is critical that industrial companies in Türkiye regularly report their product-based emission calculations through a comprehensive carbon accounting system.

Climate change risks are among the most critical strategic threats for today’s businesses and can be broadly categorized into two main types: physical risks and transition risks.

Physical risks stem from direct environmental impacts such as natural disasters, extreme heat waves, drought, and flooding caused by climate change, while transition risks are shaped by changes in carbon pricing, legal regulations, policies, technological transformations, and market preferences. In this context, cbam stands out as one of the strongest transition risks based on regulations.

Companies that fail to adapt to the cbam will face not only cost burdens but also multifaceted risks such as market loss, difficulty in accessing sustainable finance, and loss of corporate reputation. Therefore, cbam is not merely a carbon pricing mechanism; it also signifies that climate transition risks for industries are no longer ‘theoretical’ but have become concrete, measurable, and cost-driving.

CLIMATE LAW AND CBAM BECOMING REALITY: ETS AND CARBON PRICING ON THE HORIZON

The Climate Law is the concrete manifestation of foreign trade-oriented climate policies such as CBAM in Türkiye. This law aims to establish a mechanism similar to CBAM and to systematically integrate carbon pricing into domestic law by creating a national Emissions Trading System (ETS). According to the law, businesses subject to the ETS will be required to obtain greenhouse gas emission permits and surrender allowances equivalent to their annual emissions. Penalties are imposed for allowances that cannot be surrendered. In this context, carbon pricing is no longer merely an environmental responsibility; it has become an element that has direct financial consequences.

In this regard, the CBAM should be seen as the first link in a chain of regulations that requires exporters to comply not only in foreign markets but also in the domestic market. Carbon calculation, reporting competence, and low-carbon production transformation of Turkish industrialists are now becoming a priority agenda not only for companies exporting to the EU but also for all large companies operating in the country.

CONCLUSION

Green transformation is no longer a choice; it is an inevitable requirement of the new global trade paradigm. By embracing this transformation process early on and taking concrete steps to reduce carbon emissions, Turkish exporters are not only contributing to the environment, but also strengthening their brand values, our country’s global competitiveness, and its goal of becoming a major economy. These steps, which may seem like a cost item today, will open the door to tomorrow’s growth opportunities. And as always, those who act early will get ahead.