10 billion dollar carbon alarm in exports: EU's new regulation will hit 6 sectors

EU's new regulation will hit 6 sectors

The European Union's "Carbon at the Border Regulation" (CCRR) is ushering in a new era for Turkish exporters. The implementation, which covers six critical sectors from iron and steel to aluminum, will directly affect Turkey's trade volume of 10 billion dollars, which corresponds to 42 percent of Turkey's total exports in the relevant items.

The European Union is rewriting the rules of trade while implementing the "Green Deal" targets to combat climate change. According to data from the Ministry of Trade, the EU's Carbon Regulation Mechanism at the Border, which was developed to prevent carbon leakage and protect the competitiveness of its own producers, means a critical bend for the Turkish industry. The transitional period started in October last year and envisages that exporters will be taxed according to the emissions they produce.

The lion's share of iron-steel and aluminum

The regulation initially covers the iron and steel, aluminum, cement, fertilizer, electricity and hydrogen sectors, where the risk of carbon leakage is highest. According to the data, the total exports of these six sectors to the EU last year amounted to 10 billion dollars. This figure accounts for 42 percent of the exports of these sectors to the whole world.

On a sectoral basis, the biggest risk and volume is in iron-steel and aluminum. While Turkey sells the most iron and steel to EU countries among the products covered by the application, export revenues of 6 billion 255 million dollars were obtained in this item last year. The share of the EU market in this sector was recorded as 39 percent. However, it is noteworthy that the sector most dependent on the EU market is aluminum. Last year, 59 percent, more than half of the aluminum exports, which exceeded 3 billion dollars, were made directly to EU countries. On the other hand, fertilizer, electricity, cement and hydrogen exports are among the items that will be affected by the regulation.

Financial obligations start in 2026

The timetable for the main financial obligations awaiting industrialists is in motion. While the main implementation period of the mechanism is expected to start in January 2026, tax obligations are planned to be gradually introduced between 2026 and 2034. It is also on the agenda to further increase the number of sectors covered in the coming years. This makes it a commercial imperative for Turkish exporters to reduce the carbon and environmental footprint of their products, rather than a choice.

Ministry warns to "change your strategy"

While the Ministry of Trade continues its efforts to ensure that producers are not caught unprepared for this new trade order, it warns companies to make radical changes. The Ministry draws attention to the need for producers to determine long-term emission reduction strategies instead of short-term solutions.

In this context, companies need to review their production processes, fuel consumption and raw material supply chains from scratch. According to the Ministry's roadmap, it is vital to implement techniques that will increase energy efficiency in production and switch to biofuels or renewable energy sources instead of fossil fuels. In addition, low-carbon scrap and inputs used in production are among the factors that will ease the tax burden of the final product. Experts emphasize that companies should revise not only their production lines but also their commercial contracts to include embedded emission data and criminal liabilities. Competitiveness in the trade of the future will no longer be measured by price alone, but by the ability to "produce low carbon".