Border Carbon Adjustment Mechanism Declaration

ABOUT THE CARBON BORDER ADJUSTMENT MECHANISM (CBAM)

The Carbon Border Adjustment Mechanism (CBAM) is one of the key instruments for achieving the European Union’s (EU) greenhouse gas emission reduction targets under the European Green Deal.

It is recognized that the carbon pricing under the EU Emissions Trading System (ETS) may lead to increased costs in sectors with high greenhouse gas emissions and energy intensity, potentially prompting companies to relocate their production to countries outside the EU with less stringent climate policies (carbon leakage risk). As the EU ETS becomes more stringent, companies unable to reduce emissions will face rising carbon costs. In this context, CBAM has been developed as a mechanism to replace free allocations provided to prevent carbon leakage, with free allocations being phased out gradually while CBAM obligations are introduced proportionally. Under the mechanism, importers are expected to bear equivalent costs to those under the EU ETS, linked to the greenhouse gas emission values associated with the production of CBAM-covered products.

TURKEY ranks among the leading countries exporting to Europe. Therefore, it is essential to align with the regulations established by the EU to maintain trade relations.

Key Implementation Principles of the Agreed Framework for CBAM:

1- Implementation Schedule
The CBAM Regulation will enter into force on **October 1, 2023**, with reporting obligations limited to this initial phase. A **transition period** will apply from **October 1, 2023, to December 31, 2025**, during which no financial obligations will arise.

This transition period serves to establish implementation principles, collect data, and identify areas requiring improvement. Based on experiences during this period, necessary adjustments and secondary legislative regulations will be implemented.

As mentioned above, during the transition period ending in 2025, no charges will be applied to the embedded emissions of imported products. The main application period, where financial obligations take effect, will commence on **January 1, 2026**.

2- Product and Greenhouse Gas Scope

CBAM covers the **steel, aluminum, cement, fertilizers, electricity**, and **hydrogen** sectors.

3- Reporting Obligations During the Transition Period (CBAM Regulation, Article 35)

The import of CBAM-covered products will continue to be carried out by either direct importing companies or indirect customs representatives acting on behalf of the importing companies, as is currently the case.

During this period, importers of CBAM products or their indirect customs representatives will submit a CBAM report for each quarter within the first month following the end of that quarter. For example, imports made in the January-March period must be reported by the end of April.

The first reporting period for emissions and carbon charges paid in third countries is set for **January 1–31, 2024**. Although the first reporting deadline may be adjusted based on needs, data collection for emissions reporting must begin by **October 1, 2023**, or this date must be used as the starting point for the data to be submitted.

Furthermore, the emission monitoring and calculation methodologies to be used for reporting have been developed by an expert group established by the European Commission. Secondary legislation containing the procedures and principles for implementing the CBAM transition period was adopted on **August 17, 2023**, thereby establishing the reporting obligations for CBAM products during the transition period and the methodology for calculating embedded emissions arising from their production processes.