EU Carbon Tax to Take Effect on Exports

Carbon Tax Begins on EU Exports Ege İhracatçı Birlikleri General Secretary İ. Cumhur İşbırakmaz recalled that trade volume between the European Union and Turkey stands at USD 143 billion, and provided information on the activities and projects of EİB, which has adopted the European Green Deal as a main agenda item. "We hold important supplier positions in many sectors in our trade with the EU. Accelerating the transition to a low-carbon economy through the sectoral action plans of exporter associations is one of the most important steps. As EİB, we are implementing numerous projects under the framework of the European Union's European Green Deal, which clarifies the framework of the global climate regime. We declared 2020 as the 'Year of Sustainability' and prepared a 'Sustainability Manifesto'. Our Sustainability Working Group continues to add new projects to its agenda with each passing day. Our association obtained zero-waste certification. We became the first Exporter Association from Turkey to join the United Nations initiative Global Compact," he said.

Transition to Low-Carbon Development in Industrial and Agricultural Sectors

İşbırakmaz explained that EİB organized a series of training programs titled "EİB Sustainability Days" to inform companies about the Green Deal, stating: "75 percent of Turkey's organic product exports are carried out from our region. Our organic sector has applied for two projects on the European Green Deal and Climate Change. Under our "We Know the Pesticides We Use" project, we conduct analyses of our products in accredited laboratories. We support our industrial and agricultural sectors with our Sustainable UR-GE projects to accelerate the transition to environmentally-friendly and low-carbon development." he said.

Key points on the fundamental principles of the European Green Deal and the "Carbon Border Adjustment Mechanism" which imposes additional tax on exports to the EU:

-The Carbon Border Adjustment Mechanism will be implemented gradually. The transition phase will begin in 2023 and end in 2025. -Countries will need to demonstrate that they have covered emissions with Carbon Border certificates. It will begin in sectors with the highest carbon emissions and risk, such as cement, aluminium, iron and steel, fertilizers and electricity. -For now, only these products will be affected. A vital investment for every company's future and national economies. This way, there will be cooperation between Turkey and the EU both within the Customs Union and internationally. -In June 2021, the EU's climate law, which made its targets legally binding, came into force. In July, a legislative package adapted to the 55 percent carbon-neutral target for 2030 was presented. -Turkey favours ensuring this mechanism is compatible with Customs Union and WTO rules, that it is transparent and fair, that it is not applied as a protectionist policy, and cooperation with the EU in terms of access to financing sources in areas requiring major transformation such as cement, iron and steel, and aluminium sectors. -In the coming days, a comprehensive EU sector strategy covering sectors such as motor vehicles, electrical and electronic equipment, textiles, clothing and chemicals related to the circular economy will be announced. Motor vehicles account for 70 percent, textiles 50 percent, and electronic goods 40 percent of our exports. -Important issues and fundamental needs that industrial products may face with the European Green Deal: provision of suitable financing sources for green transformation, access to R&D and recycling technologies, utilization of clean energy and green transport opportunities. -Measuring carbon emissions at market entry, certification, bringing production back, waste conversion are important elements. Turkey will need to develop policy and practices compatible with EU legislation in chemicals and meet ECO labelling criteria. -Under sustainability; the EU's common agricultural policy will be transformed to create a sustainable food system. -Use of chemical pesticides, fertilizers and antibiotics will be significantly reduced. A digital tracking system will be established to increase organic farming and provide all parties with information on environmental footprint from production to supply. -The energy sector will be based on renewable energy, hydrogen use will be widely promoted, and a renovation wave will be launched in the construction sector to increase energy efficiency. -With the Sustainable and Smart Mobility Strategy announced in December 2020, the EU aims to reduce transport-related emissions by 90 percent. The target is to halt production of fossil fuel vehicles by 2035. -There is an initiative towards global cooperation. The EU is adding provisions to all its trade agreements within the framework of green transformation. Agreements with Japan, Vietnam and the United Kingdom are examples. The same arrangement could be included in the update of the Customs Union between Turkey and the EU.

Key points on the United Kingdom's Sustainability Policy are as follows;

-The view prevails that the United Kingdom could play a leading role in global green transformation by developing innovative green technologies and become a global hub for green finance, thus becoming the centre of green technology and finance. -The United Kingdom plans to make new investments of around GBP 12 billion for green transformation. At the same time, 250,000 jobs will be created for activities compatible with the green economy. The first large-scale economy to commit to net-zero emissions by 2050. -From 31 October to 12 November, the "COP26" climate conference will be held in Glasgow under the United Kingdom's presidency. Thus, it will play an important role in becoming a country dominating developments. -GBP 2 billion in financing has been allocated for green growth projects. The United Kingdom requires that from April 2022 onwards, at least 30 percent of the raw materials used in plastic products whether produced domestically or imported must be obtained from recycled raw materials. Key points on Russia's sustainability policy are as follows; -35 percent of Russia's exports and imports are with the EU. While 71 percent of Russian economic exports were energy-based in 2013, this figure stood at 42 percent in 2020 and 44 percent in 2021. And 50 percent of this energy export in 2013, 45 percent in 2020 was directed to the EU. -Russia had approximately USD 12 billion in coal exports in 2020. 20 percent of this is directed to the EU. Between 2013 and 2021, hard coal production increased by 30 percent. Therefore, Russia is growing in carbon footprint production. -Products that may be subject to carbon leakage; energy-intensive sectors; iron and steel, aluminium, rubber, plastic products, fertilizers and paper hold a very important share in Russia's exports. The European Green Deal poses risks for Russia's exports and production. With the Paris Agreement, if all parties fulfil their obligations by 2030, Russia's energy exports are projected to decline by 20 percent. The "Future of Trade: Current Developments" webinar was held under the moderation of Ege İhracatçı Birlikleri General Secretary İ. Cumhur İşbırakmaz, with the participation of Head of Trade and Economic Section at the EU Delegation to Turkey B. Przywara, Chief Trade Adviser to the EU Canan Nilüfer Dora, Trade Counsellor in London Tarık Sönmez, and Trade Counsellor in Moscow Feridun Başer.