What is CBAM and Why is it Important?

The EU’s Carbon Border Adjustment Mechanism (CBAM) is a trade policy tool designed to prevent carbon leakage and help achieve the objectives of the European Green Deal.

Its main goal is to price the carbon content of goods produced outside the EU, thereby preventing EU-based producers from facing a competitive disadvantage.

This regulation creates significant transformation pressures for countries exporting to the EU, such as Türkiye.

1. Who is Affected?

CBAM is initially limited to the following sectors:

• Iron and steel
• Aluminium
• Cement
• Fertilizers
• Electricity
• Hydrogen

Every company operating in these sectors and exporting directly or indirectly to the EU is affected by this regulation.
For instance, even if a Turkish steel producer does not sell directly to the EU, its products will still fall under CBAM if they are routed to the EU through another producer.

2. How Will It Work? (Transition Period and Beyond)

• 2023–2025 (Transition Period):
  
  • Companies will only be required to report emissions.
  • No financial payments will be imposed during this period; however, the quality of reporting will determine the future financial burden.
• From 2026 Onward:
  
  • Exporters to the EU will be required to purchase CBAM certificates corresponding to the carbon emissions embedded in their products.
  • The cost will be determined based on carbon prices in the EU Emissions Trading System (EU-ETS).

3. Status of Regulatory Alignment in Türkiye

Türkiye does not yet have a national carbon pricing mechanism (ETS) like the EU.

However, the Ministry of Environment, Urbanization, and Climate Change is preparing to implement a National Emissions Trading System, planned for the 2024–2026 period.

This transition brings forward the obligation for carbon accounting and reporting for companies operating in CBAM-covered sectors.

4. What Does It Mean for Energy-Intensive Sectors?

Companies in these sectors must:

• Calculate product-level carbon footprints (CO₂e per ton)
• Track the carbon content of raw materials
• Model production processes based on emission factors
• Request carbon data from input suppliers
• Establish human and software infrastructure for CBAM reporting

In sectors like cement, aluminum, and steel—where carbon intensity is high—the financial burden may become substantial.

5. How to Ensure Strategic Alignment?

• Conduct verifiable emissions calculations using GHG Protocol or ISO 14064-1
• Develop “product-level” carbon intensity tables for CBAM reports
• Digitalize data management—move beyond Excel
• Standardize carbon data sharing within the supply chain
• Prepare a transition plan for Türkiye’s ETS alignment

6. How Much Will It Cost?

EU ETS carbon prices currently range between EUR 60–90 per ton. Multiplying this by the average emission factor per unit product provides an estimate of CBAM-related costs per product.

It is difficult to pass this cost on to export prices, as the European market is increasingly rewarding “carbon-free” products with a premium.

Conclusion

CBAM is more than just a trade regulation for energy-intensive sectors; it also mandates transformation in digital infrastructure, carbon management, and production efficiency.

The next two years will be critical for companies in terms of data collection, verification, and strategic positioning.

At S4A, we offer sector-specific consultancy, carbon accounting support, and regulatory monitoring services to help firms comply with CBAM.