Turkey wasting no time preparing for Europe’s carbon border tax

The introduction of the carbon border adjustment mechanism (CBAM) could drastically change the business conditions for all companies exporting goods to the European Union from countries without a national emissions trading system, and Turkey is now exploring options how to deal with it.

There is not much time, however, given that the European Commission intends to publish a formal legal proposal for the CBAM by the end of June. The schedule is to be in implementation by the beginning of 2023.

A month ago, the European Parliament adopted a resolution to back the CBAM. The carbon border tax should be introduced for oil refineries, the glass, paper and aluminium industries, the power sector, and energy-intensive industrial sectors such as cement, steel, chemicals, and fertilizers, the resolution said.

The CBAM could bring an additional cost of EUR 1.08 billion to Turkey’s industry

Of course, it is all about costs for these companies. According to a recent report by the Turkish Industry and Business Association (TUSIAD), the CBAM could bring an additional cost of EUR 1.08 billion to Turkey’s manufacturing sector, Platts reported.

According to Clean Energy Wire, the TUSIAD has expressed an interest in aligning their policies with the EU standard and asked for a mechanism and funding to facilitate this approach.

The Ministry of Environment and Urbanization is drafting an impact assessment study

In order to shed some light on the CBAM’s consequences for Turkey, its Ministry of Environment and Urbanization is drafting an impact assessment study. The results of the study are expected by mid-2021, the European Bank for Reconstruction and Development (EBRD) has said on its website.

The EBRD is supporting the ministry in preparing the study in order to foster an informed debate about the monetary implications and transitional risks for Turkish exporters to the EU.

In order to prepare for the CBAM, Turkey’s industry is not wasting any time.

“As Turkish mills are already investing in green steel, I don’t think that the CBAM will have a significant effect on our exports to the EU,” said Veysel Yayan, secretary general of the Turkish Steel Producers’ Association (TCUD), Eurometal.net has reported.

In 2020 Turkey was one of the leaders of renewables’ growth in Southeast Europe. The country added the most renewable capacity in one year in 2020.

Three levels of support provided by EBRD

To strengthen Turkish interest in carbon pricing and contribute to an enabling environment for a scaled-up domestic carbon market, the EBRD is providing capacity-building support.

The bank’s Mid-size Sustainable Energy Financing Facility (MidSEFF) Carbon Market Development Support Programme offers three levels of support.

On a national level, this means policy dialogue. The program supports carbon market development in Turkey by promoting initiatives that can further increase the participation of sovereign and private sector actors in the national and international carbon market, including advising the Turkish government on the impacts of the CBAM, the EBRD said.

At bank level, the support consists of helping Turkish banks develop carbon market services thorough trainings across a range of carbon market activities, including project origination and finance, and trading and brokerage of carbon credits.

Finally, at project level, the EBRD program is supporting the carbon asset development process, according to the EBRD website. The program delivers technical assistance to renewable energy and energy efficiency projects financed under MidSEFF that are eligible for carbon financing.