The EU Carbon Border Adjustment Mechanism
Broader developments across Europe, including the European Green Deal, have potential to implicate the future direction of Turkey’s carbon markets. The EU is considering the implementation of a carbon border tax, which would reflect the amount of carbon emissions attributed to goods entering the bloc. While the particulars of this tax have yet to be defined, crucially, this tax could financially disadvantage producers operating carbon-intensive processes, as well as producers from countries without carbon-pricing mechanisms compatible with EU regulations. As such, the introduction of a robust carbon price in Turkey could give it a competitive advantage in this scenario. An ambitious pricing mechanism that is aligned with EU regulation could secure exemption from this tax, subsequently increasing the cost-competitiveness of its renewable energy production processes and exports, compared to more carbon-intensive energy projects across Europe.