Agenda for Exporters: What is Border Carbon Regulation (CBAM) and what will it change?

The New Competitive Landscape: CBAM Challenges for Exporters and Ways to Make a Difference in Global Trade

The European Union's Border Carbon Arrangement (CBAM), implemented in line with the Green Deal goals, is reshaping the rules of global trade. This mechanism, which is especially critical for companies exporting to Europe, brings radical changes in many areas from competition to supply chains. So, what exactly is CBAM and how does it affect exporters, global supply chains and production locations?

What is CBAM and How Does It Affect Exporters?

CBAM (Carbon Border Adjustment Mechanism) is a mechanism that the European Union calls "Carbon Adjustment at the Border". Its main purpose is to protect the competitiveness of environmentally friendly manufacturing firms within Europe.

Producers in Europe were facing high costs for investing in cleaner energy and green technologies. Previously, however, products from foreign markets such as Turkey, China or Russia could enter the European market without any environmental audits. This created an unfair competitive environment for European producers.

CBAM is stepping in to restore this balance. It is now mandatory to calculate and declare the embedded carbon emissions of products to be sold to the European Union. After paying an additional fee determined according to these emission values, the products can pass through customs. In this way, it is aimed to create a fair competitive environment between producers within the EU and exporters outside.

Impact of CBAM on Global Supply Chains and Production Locations

Policies such as CBAM have the potential to profoundly affect global supply chains and production patterns. For Turkey, this situation holds both opportunities and risks.

Positive Aspects

If a producer in Turkey makes environmentally friendly production, regularly measures its emissions and makes improvements, its competitiveness in the European market will increase significantly. Because the gap that will arise when companies that cannot meet these standards withdraw from the market will be filled by environmentally friendly producers who are prepared.

Negative Aspects

Companies that have been exporting to Europe for many years but have ignored environmental standards and emission measurements are at risk of losing market share and going out of business.

Geographical proximity is also becoming an important advantage. Countries close to Europe, such as Turkey, are in an advantageous position thanks to lower indirect emissions from transportation. Therefore, CBAM is not only a necessity for Turkey, but also a strategic opportunity to gain a stronger foothold in the European market and accelerate the transition to green production models.

Which sectors are covered by CBAM in the first phase?

CBAM has targeted the most energy and emission intensive sectors in the first phase. The number of sectors, which was five when it was first announced, was later increased to six by adding one more. These sectors included in the transition process are as follows:

• Iron and Steel
• Cement
• Fertilizer
• Electricity
• Aluminum
• Hydrogen (added later)

The transition process is planned to be completed by the end of 2025, after which the taxation process will begin. In the long term, it is envisaged that many other sectors will be included in this system in line with the 2030 targets.