The national greenhouse gas emissions trading system (ETS) in Turkey will start its pilot phase in early 2025. At the same time, the government is working on its own carbon-based import adjustment mechanism (CBAM).
This was reported by Helge Wiggrefe, an expert at kolum.
Launch of the Turkish ETS
The expert says that Turkey plans to introduce its own ETS, modeled on the European Emissions Trading System (EU ETS). The pilot phase will start in 2025, while the first full implementation phase is scheduled for 2027 to 2034. The main objectives are:
- reducing emissions in high-impact sectors such as oil refineries, metals, chemicals, and cement production;
- encouraging the transition to clean technologies;
- establishing a reliable carbon pricing mechanism.
How the emissions trading system will work in Turkey
According to Helge Wiggrefe, the allowances will be allocated through auctions and sold through the Turkish Energy Exchange. This scheme has the potential to generate significant government revenue, similar to the European system. In addition to its environmental impact, the ETS is also seen as a strategic response to the impending financial burden of the EU's CBAM.
CBAM as a challenge for Ankara
According to the kolum expert, the introduction of the EU CBAM is a direct challenge for the Turkish industry.
“Almost 50% of Turkish exports go to the EU, including many products from sectors with high emissions. Starting in 2026, these exports will be subject to a carbon tax unless they can demonstrate that the equivalent carbon price has already been paid in Turkey,” he explains.
According to Helge Wiggrefe, this has two main consequences:
- without a functioning ETS, Turkish companies may face significant competitive disadvantages;
- European companies importing Turkish goods will face higher costs.
“The engineering, construction, and automotive industries, which rely heavily on Turkish intermediate products, will be particularly affected,” the expert says.
He believes that the introduction of the Turkish ETS can mitigate these costs, as carbon payments paid in Turkey will be credited to the CBAM levy. However, the expert notes that this depends on the actual price level in the Turkish ETS, which is yet to be determined.
“If the Turkish carbon prices are too low, EU importers will still have to pay the difference to match the EU ETS prices,” he says.
Implementation of the Turkish CBAM
In addition to the ETS, the Turkish government plans to create its own CBAM model. It is expected that a draft law will be submitted to the parliament aimed at introducing a carbon tax on imports, similar to the EU approach.
According to Helge Wiggrefe, the Turkish CBAM will have many advantages:
- It will protect the domestic industry. It will ensure that Turkish companies investing in low-emission technologies are not disadvantaged by cheaper, emissions-intensive imports.
- It will promote fair competition. It will prevent countries with weaker climate legislation from gaining an unfair cost advantage due to lower carbon prices.
- Revenues from the Turkish CBAM could be used to invest in renewable energy and clean technologies, which would accelerate the country's sustainable economic transition.
However, the expert notes that the implementation of such an idea remains a challenge.
“Establishing a national mechanism for carbon adjustment of imports is a complex process and may face resistance from trading partners. In addition, ensuring compatibility between the Turkish CBAM and the European CBAM will be crucial to avoid double taxation for businesses,” Wiggrefe warned.
As EcoPolitic reported earlier, in November 2023, EcoPolicy wrote about Turkey's intention to introduce a national emissions trading system in 2024. Later, we reported that the launch of the Turkish ETS was repeatedly postponed.
