Turkish exporters could have to take on additional costs as new EU carbon rules kick in, found a study by the European Bank for Reconstruction and Development (EBRD) released on Thursday.
Businesses, especially in energy-intensive industries as cement, steel, and aluminum, could be paying extra charges of €777 million ($922 million) under the EU’s Carbon Border Adjustment Mechanism (CBAM), the study indicated, adding, however, that these would decrease to €399 million if only direct emissions are considered.
The CBAM is a price on imports proportionate to the carbon content of goods imported from countries without adequate carbon pricing in order to guard against carbon leakage.
This mechanism will be introduced gradually and will initially apply only to a select number of goods. A reporting system will apply from 2023 and importers will start paying a financial adjustment in 2026.
The EU aims to hasten the decarbonization process of economies in line with the Paris Agreement, a legally binding landmark treaty in global efforts against climate change.
“For non-EU countries with a high percentage of energy-intensive exports to the European Union, this new mechanism is expected to lead to steep adjustment costs,” the study said.
There are still uncertainties on how far product coverage would go down the value chain, estimates showed that CBAM payments could represent a significant share of current prices for some goods, it said, with the possibility of rising up to about 50% for cement, 18% for aluminum, and 9% for steel.
“The EBRD is working on a set of strategic policy choices for the government to mitigate trade risks and foster domestic low-carbon economic development in line with the EU climate policy objectives,” Sule Kilic, the EBRD deputy head for Turkey, said in a statement.
The bank also urged Turkish companies that to access financing, climate considerations and, in particular, climate risk management, would be of increasing importance.
Amid global efforts to mitigate the threat of climate change, carbon prices have doubled this year to €52 per metric ton in the EU’s Emissions Trading System placing increasing pressure on emitters to decarbonize, it added.
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