The European Union's Border Carbon Tax Regulation and Its Possible Effects on Turkey's Exports in the Short Term

Abstract

The European Union's carbon border adjustment mechanism (CBAM) ratified by the European Parliament as a part of the European Green Deal in 2023 will be in effect in the beginning of the year of 2026. But EU's CBAM regulation shows that compensatory carbon tax on imports cannot be applied in a non-discriminatory manner in terms of the destination principle. Therefore, it is seen that the paragraph G of Article 20 of the GATT allowing for the measures to protect the exhaustible natural resources, may constitute a more appropriate justification for the EU's carbon adjustment at the border. The EU's border carbon adjustment mechanism will also have a negative impact on international competition, primarily in terms of carbon-intensive industries in the countries such as Turkey. It is considered reasonable for Turkey to introduce appropriate policy tools to price carbon in a way not being subject to the European Union's carbon tax at the border.