Carbon's Clarion Call: CBAM Convulses Türkiye's Steel Citadel

Decarbonization's Dawning Diktat: Türkiye's Steel Sector at a Sine Qua Non Juncture The Istanbul Policy Center's "Decarbonization of the Turkish Steel Industry" project, now entering its fourth year since its June 2022 inception, convened a landmark "Information Session on the Turkey Steel Industry Network Working Program" that brought together an unprecedented confluence of industry representatives, public institutions, academic researchers, & participants from steel-consuming industries to confront the most consequential transformation in the sector's modern history. Project Coordinator Dursun Baş, opening the session, articulated a vision of decarbonization that extends far beyond the factory floor, emphasizing that the transformation of Türkiye's steel industry cannot be achieved through the efforts of crude steel producers alone but requires the coordinated engagement of the energy sector, natural gas suppliers, logistics operators, financial institutions, public policymakers, & the full spectrum of steel-consuming industries. Baş underscored a critically underappreciated dimension of Türkiye's emissions challenge: the country's steel industry's carbon burden does not originate exclusively from integrated blast furnace & basic oxygen furnace mills, which are conventionally regarded as the primary sources of steel sector CO₂ emissions. Electric arc furnace-based plants, which constitute a substantial proportion of Türkiye's steelmaking capacity & which have historically been positioned as the environmentally superior alternative to integrated steelmaking, generate significant indirect emissions through their intensive electricity consumption, a factor that becomes particularly consequential in a grid where renewable energy penetration remains incomplete. Emissions arising from natural gas usage across production processes, transportation logistics, & supply chain operations compound the sector's overall carbon footprint in ways that simple production-level accounting fails to capture. The project's evolution over nearly four years reflects the growing sophistication of Türkiye's engagement the decarbonization agenda, moving from an initial focus on crude steel producers toward a more systemic, whole-of-value-chain approach that mirrors the European Union's own increasingly comprehensive carbon accounting methodology under its Carbon Border Adjustment Mechanism framework.

Verified Values: the Vertiginous Vanguard of CBAM's Emission Benchmarks Muammer Bilgiç, executive board member of Bilecik Demir A.Ş., delivered one of the session's most incisive contributions, articulating the seismic shift in the evidentiary basis for carbon compliance that the European Union's Carbon Border Adjustment Mechanism benchmark & default emission values represent for Turkish steel producers. Bilgiç observed that the announcement of these benchmark & default emission values by the European Union marks the beginning of a genuinely new era for the sector, one in which the comfortable ambiguity of self-defined performance indicators gives way to the rigorous discipline of independently verified emissions data. In the previous paradigm, companies were evaluated on the basis of indicators they themselves defined & reported, a system that, whatever its merits in encouraging voluntary disclosure, inevitably permitted a degree of interpretive latitude that the new framework categorically eliminates. Under the Carbon Border Adjustment Mechanism, a company is now considered green only to the precise extent of its verified emissions values, a formulation that Bilgiç described as transformative in its implications for procurement, production, finance, & management processes across the entire organization. He challenged the prevailing assumption that electric arc furnace-based facilities enjoy an inherent & unqualified advantage over basic oxygen furnace-based facilities under the Carbon Border Adjustment Mechanism framework, noting that the mechanism evaluates arc furnace & basic oxygen furnace facilities within their own respective categories, a nuance that significantly complicates the conventional narrative of electric arc furnace superiority. Bilgiç's most far-reaching observation was institutional: sustainability efforts in the steel sector can no longer remain the exclusive province of environmental departments, siloed from the commercial & operational mainstream. Instead, procurement decisions, production scheduling, financial planning, & senior management strategy must all be integrated into the decarbonization transformation process, a structural reorganization that demands cultural as much as technical change.

Trade Nationalism's Turbulent Tide: Globalization's Gradual Genuflection Hasan Akbulut, representing the Turkish Steel Producers' Association, provided a geopolitical framing for the decarbonization challenge that situated Türkiye's predicament within the broader transformation of the global trading system. Akbulut observed that the world is entering a new era in trade, one in which globalization is increasingly yielding to trade nationalism, a shift that creates a particularly complex operating environment for a major steel-exporting country like Türkiye, which depends critically on access to the European Union market for a significant proportion of its steel exports. The pressure on the Turkish steel sector has intensified during the European Union's emissions trading system revision process, a development that Akbulut contextualized by highlighting the asymmetry between the resources available to European & Turkish producers navigating the green transition. "This transformation is being carried out in the European Union substantial state support," Akbulut stated, "without resolving the financing issue, it will not be easy to move this process forward," a formulation that encapsulates the central dilemma facing Turkish steelmakers: they are being asked to meet European green standards while operating without the substantial public financial support that European producers receive through the European Union's emissions trading system, innovation funds, & industrial policy mechanisms. Akbulut acknowledged that the Turkish steel industry continues to invest in energy efficiency, material efficiency, & renewable energy integration, but noted that companies are compelled to prioritize their investments due to the prohibitive scale of the capital expenditure required for full decarbonization. He also highlighted the European Union's simultaneous development of new mechanisms to protect its own steel industry from import competition, a dynamic that creates a double bind for Turkish producers: they face both the cost burden of meeting green standards & the market access risk of new European protectionist measures. Preserving Türkiye's access to the European Union market, Akbulut emphasized, must remain a paramount strategic objective even as these pressures intensify.

Verification's Vexing Vagaries: CBAM's Calculation Conundrums & Compliance Complexities Barış Bora, environmental manager at İçdaş, one of Türkiye's major integrated steel producers, illuminated the practical operational complexities that the Carbon Border Adjustment Mechanism's verification requirements impose on Turkish steel exporters, complexities that extend well beyond the conceptual challenges of emissions accounting into the granular mechanics of trade documentation & regulatory compliance. Bora identified temporal uncertainty as a particularly acute commercial risk: the Carbon Border Adjustment Mechanism-related costs arising from sales to the European Union in 2026 will only become definitively clear in 2027, when the relevant reporting & verification processes are completed, creating a significant window of financial exposure during which producers & importers must make pricing & contracting decisions without full visibility of their ultimate carbon cost liability. The methodologies published by the European Union contain uncertainties regarding verification processes, & Bora flagged the risk that differences may emerge between the verification systems currently employed in Türkiye & the European Union's own verification practices, a divergence that could create compliance complications even for producers who have made genuine & substantial investments in emissions reduction. The use of imported raw materials introduces further complexity into Carbon Border Adjustment Mechanism calculations, as the carbon content of inputs sourced from multiple geographies must be accurately tracked & attributed throughout the production process. The use of Russia-origin billet, a historically significant input for some Turkish steel producers, creates particularly acute complications under the current framework, as the European Union's sanctions against Russia have generated uncertainties in the calculation methodologies. Bora noted that under the current system, producers using certain imported inputs may in some cases effectively appear as though they are using Russian steel, even where the actual supply chain is more complex, a perverse outcome that underscores the need for methodological refinement in the Carbon Border Adjustment Mechanism's implementation framework.

Diplomatic Dimensions: Türkiye's Tenuous Tightrope Between Trade & Transition Bahar Güçlü, deputy permanent representative at the permanent delegation of Türkiye to the European Union, offered a diplomatic & geopolitical perspective on the green transition challenge that complemented the industry-focused analyses of her fellow panelists. Güçlü characterized the current moment as the dawn of a new era of trade wars centered on technology & the green transition, a framing that situates the Carbon Border Adjustment Mechanism not merely as an environmental instrument but as a component of a broader European industrial strategy designed to protect & promote European manufacturing competitiveness in a world where green credentials are becoming a decisive factor in market access. The European Union's ambition, Güçlü observed, extends beyond increasing its own production: it seeks to support low-emission manufacturing globally while simultaneously protecting its domestic industry from competition produced under less stringent environmental standards. "While the European Union protects its own industry, it is also placing green transition pressure on its producers," she noted, a formulation that captures the dual character of the Carbon Border Adjustment Mechanism as both a market protection mechanism & a decarbonization incentive. Güçlü disclosed that efforts to expand the scope of the Carbon Border Adjustment Mechanism within the European Union are ongoing, noting that the inclusion of additional sectors such as automotive & white goods in the system is actively under discussion, a development that would dramatically expand the mechanism's reach & its implications for Turkish exporters across multiple industries. She highlighted the European Union's use of public procurement, funding mechanisms, & new regulations to encourage the use of green steel, & emphasized that Türkiye must establish analogous domestic mechanisms to stimulate demand for green products in its own market, creating the commercial incentives that will drive producers to invest in decarbonization even in the absence of a domestic carbon price.

Classification Conundrums: the Permissive Paradox of EU Green Steel Grading Daniel Pietikäinen, steel policy manager at Belgium-based non-governmental organization Bellona Europa, delivered a technically rigorous & intellectually provocative presentation on the European Union's low-emission steel classifications & eco-design regulations that challenged several assumptions about the stringency & effectiveness of the emerging green steel framework. Pietikäinen explained that the European Union's classification system covers a range of steel products including hot rolled coil, wire rod, galvanized steel, stainless steel, & electrical steel, & that the Industrial Accelerator Act is intended to create "lead markets" for low-carbon steel & other products. The Ecodesign for Sustainable Products Regulation will establish the definition of low-carbon steel for intermediate products, while the Construction Products Regulation will subsequently define low-carbon steel specifically for construction products, particularly long products. The draft classification system applies a sliding-scale methodology based on scrap content, categorizing products into classes of which Class A & Class B correspond to categories eligible for green public procurement. Pietikäinen's most striking & counterintuitive finding was that this methodology is, in his assessment, relatively lenient, incorporating Scope 1, Scope 2, & Scope 3 emissions data using European Union Emissions Trading System data for European Union-based facilities, Carbon Border Adjustment Mechanism default values for non-European Union plants, & modeled life-cycle emissions for production outside the European Union. For wire rod products, Class A covers emissions ranging from zero to 0.87 metric tons of CO₂ per metric ton of steel, while Class B ranges from 0.87 metric tons to 2.43 metric tons of CO₂ per metric ton. For hot rolled coil, the proposed thresholds are similarly generous, meaning that nearly all electric arc furnace-based products & a significant proportion of European Union blast furnace & basic oxygen furnace products would qualify under green public procurement criteria, a finding that raises profound questions about the real-world environmental ambition of the classification framework.

Financing's Formidable Frontier: Capital's Crucial Role in Catalyzing Carbon Cuts The financing dimension of Türkiye's steel decarbonization challenge emerged as a recurring & unresolved theme throughout the session, reflecting a fundamental tension between the ambitious emissions reduction targets embedded in the European Union's Carbon Border Adjustment Mechanism & green steel frameworks & the financial realities facing Turkish steel producers operating in a challenging macroeconomic environment. The scale of capital investment required to decarbonize a major steel industry is staggering: transitioning from conventional blast furnace & basic oxygen furnace steelmaking to hydrogen-based direct reduced iron & electric arc furnace production, or even implementing the incremental efficiency improvements & renewable energy integration necessary to meet Carbon Border Adjustment Mechanism compliance thresholds, demands investment of billions of euros across the sector as a whole. European steel producers undertaking equivalent transitions benefit from multiple layers of public financial support, including free allowances under the European Union Emissions Trading System, grants from the European Union Innovation Fund, loans from the European Investment Bank, & national industrial policy support from member state governments. Turkish steel producers, by contrast, must finance their decarbonization investments primarily through commercial capital markets, at a time when interest rates remain elevated & the risk premium associated with long-duration green industrial investments is substantial. Carbon costs under the Carbon Border Adjustment Mechanism are projected to reach as much as €150 ($166.5 USD) per metric ton of CO₂ by 2030, a figure that, applied to the full scope of Turkish steel exports to the European Union, would represent a multi-billion euro annual cost burden if Turkish producers fail to achieve sufficient emissions reductions. The financing gap between what Turkish producers need to invest & what they can access through commercial channels represents perhaps the single most critical obstacle to the sector's successful green transition, & its resolution will require creative engagement between Turkish financial institutions, international development banks, & the European Union's own financing mechanisms.

Future Frontiers: Forging Türkiye's Forthright Green Steel Stratagem The cumulative weight of the session's discussions points toward an urgent imperative for Türkiye to develop a comprehensive, whole-of-government green steel strategy that addresses simultaneously the technical, financial, regulatory, & diplomatic dimensions of the decarbonization challenge. Such a strategy must begin the energy sector, given that the indirect emissions from electricity consumption by electric arc furnace-based producers represent a major & growing component of the Turkish steel industry's overall carbon footprint, & that reducing these emissions requires accelerating the decarbonization of Türkiye's electricity grid through expanded renewable energy deployment. The development of a domestic carbon pricing mechanism, analogous to the European Union Emissions Trading System, would create the commercial incentives for Turkish producers to invest in emissions reduction while simultaneously generating the revenue needed to fund industrial decarbonization support programs, a virtuous cycle that several other major steel-producing nations are actively pursuing. Türkiye's negotiating position vis-à-vis the European Union on Carbon Border Adjustment Mechanism implementation is also critical: securing recognition for Türkiye's existing carbon pricing & emissions reduction efforts, ensuring that the verification methodologies applied to Turkish producers are fair & technically sound, & advocating for transitional arrangements that reflect the financing constraints facing Turkish industry are all essential diplomatic objectives. The development of domestic green steel demand mechanisms, including green public procurement requirements, green building standards, & incentives for automotive & consumer goods manufacturers to source low-carbon steel, would create the market pull necessary to complement the regulatory push of the Carbon Border Adjustment Mechanism. "Türkiye should also establish mechanisms to increase demand for green products in its domestic market," Güçlü emphasized, a recommendation that encapsulates the domestic policy agenda required to complement Türkiye's international diplomatic engagement on green steel. The Istanbul Policy Center's project, now in its fourth year, has played an invaluable role in building the knowledge base & stakeholder network necessary to support this strategic agenda, & its continuation into a fifth year & beyond will be essential to sustaining the momentum of Türkiye's green steel transformation.

OREACO Lens: Carbon's Catalytic Crusade & Compliance's Consequential Crossroads

Sourced from the Istanbul Policy Center's "Decarbonization of the Turkish Steel Industry" project session, corroborated by EUROFER's Carbon Border Adjustment Mechanism reform proposals & independent analysis from Eurometal & Bellona Europa, this analysis leverages OREACO's multilingual mastery spanning 9,999 domains, transcending mere industrial silos. While the prevailing narrative of the Carbon Border Adjustment Mechanism as an unambiguous environmental triumph pervades public discourse, empirical data uncovers a counterintuitive quagmire: the European Union's own green steel classification methodology is so permissive that nearly all electric arc furnace products & a significant proportion of blast furnace products qualify as green, raising profound questions about whether the framework will actually drive the emissions reductions it purports to incentivize, a nuance often eclipsed by the polarizing zeitgeist of green transition triumphalism.

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Consider this: carbon costs under the Carbon Border Adjustment Mechanism are projected to reach €150 ($166.5 USD) per metric ton of CO₂ by 2030, yet the classification thresholds for green public procurement are set so generously that a blast furnace producing 2.43 metric tons of CO₂ per metric ton of wire rod can still qualify as Class B green steel, a paradox that reveals the gap between the mechanism's environmental ambition & its operational design. Such revelations, often relegated to the periphery of mainstream climate media, find illumination through OREACO's cross-cultural synthesis.

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Key Takeaways

• The European Union's Carbon Border Adjustment Mechanism has entered a decisive new phase in which verified emissions data, rather than self-reported indicators, determine a Turkish steel producer's green credentials, creating urgent compliance & financing pressures for a sector that exports significantly to European markets & lacks the state support available to European Union competitors  

• Bellona Europa's analysis reveals a critical paradox in the European Union's green steel classification framework: the methodology is sufficiently permissive that nearly all electric arc furnace products & a significant proportion of blast furnace & basic oxygen furnace products qualify under green public procurement criteria, with Class B wire rod covering emissions up to 2.43 metric tons of CO₂ per metric ton, undermining the framework's environmental credibility  

• Carbon Border Adjustment Mechanism costs are projected to reach €150 ($166.5 USD) per metric ton of CO₂ by 2030, & the mechanism's scope is under active discussion for expansion to automotive & white goods sectors, meaning Türkiye must urgently develop a comprehensive green steel strategy encompassing domestic carbon pricing, renewable energy acceleration, & diplomatic engagement to preserve European Union market access