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What will be the effects of SKDM on Turkey?
21 Sep 2025The carbon tax payment period for some products imported by the European Union (EU) within the scope of the Border Carbon Regulation Mechanism (SKDM) will begin in a few months. Exporters, who have been responsible only for reporting the carbon content of their products since 2023, will also be financially responsible from the beginning of 2026. So, what does this new era mean for Türkiye? SHURA Energy Conversion Center evaluated the economic effects of the mechanism on Turkey.
SKDM is a "carbon leakage" prevention mechanism agreed upon within the scope of the EU's Green Deal package. The purpose of the application is to apply the carbon tax collected from products produced in the EU to products coming from outside the union under the same conditions, thus preventing tax avoidance ("carbon leakage") by shifting carbon-emitting productions outside the union. In this way, it is aimed to protect the production made in the EU against imported products that are not subject to carbon tax, and to encourage decarbonization on the other hand.
SKDM covers the production of iron and steel, aluminum, cement, fertilizer, hydrogen and electricity in the first phase. It is planned to gradually reduce and eliminate the carbon tax exemptions granted to producers within the EU by 2034 for these products, and to tax imported products in the same way. In this context, while the payment obligation remained relatively low in the first few years of the application, it is expected to increase rapidly starting from 2029.
After 2030, the EU plans to expand SKDM to cover all metals, refinery products, fuels used for transportation, organic chemicals, glass, ceramics, lime and gypsum, paper and cellulose products, air and maritime transport. In addition, other countries, especially the UK, are expected to launch their own SKDM applications.
The New Era Brings Significant Opportunities and Risks
According to SHURA's report titled "SKDM and Turkey: Sectoral Interactions, Benefits and Costs", while the EU's current SKDM application has a negligible impact compared to Turkey's GDP, it appears to have reached significant amounts when compared to the added value obtained from the export of relevant products. For exports to the EU, at the current EU ETS price of 70€/ton, the emission cost reaches up to two-thirds of the added value from exports, while if the carbon price reaches 100€/ton, the carbon cost and the added value from exports become at par. This is due to the fact that the added value ratio of exported products is very low compared to their carbon intensity.
In an industrial transformation scenario suggested by SHURA, whose main axis is the production composition that will facilitate the green transformation and increase unit added value, it is revealed that the benefits can be increased while the costs are significantly reduced. In the transformation scenario, it is envisaged that the share of high-export, low-value-added products within the scope of SKDM in production and exports will decrease, the share of relatively high-value-added products will increase, and thus, additional benefits will be obtained in the machinery-equipment, electrical equipment, automotive, energy equipment, construction-infrastructure sectors that use these products as basic inputs domestically. In other words, in the Transformation scenario, despite the decrease in exports, net benefits can be achieved thanks to the increase in added value in the user (forward-connected) sectors and reduced carbon and transportation costs. Therefore, the Transformation scenario greatly alleviates the negative impacts that will arise from emission costs within the scope of SKDM.
What needs to be done to alleviate the effects of SKDM and increase the economic benefit are listed as follows:
Things to Consider
- While designing policies for SKDM sectors, the strategic dimension of these sectors and their contribution to the country's economy should not be ignored, and policies should be developed against the negative effects of structural transformation.
- Actions and investments within the framework of Turkey's current sectoral decarbonization road maps should be evaluated taking into account resource constraints and total benefit.
- In sectors that are difficult to decarbonize, such as SKDM sectors, prioritizing value-added products that reduce carbon intensity instead of maintaining current growth trends and product composition can reduce the need for high-cost decarbonization investments.
Strategies for Sectors
- By increasing the share of high value-added products in
- iron-steel and aluminum, advanced-related sectors in the domestic market should be supported and the foreign trade deficit should be reduced. By reducing exports, both the foreign trade deficit and transportation and emission costs should be reduced; Net benefit should be increased by benefits resulting from price effects in forward-linked sectors. In the medium term, the transition to value-added products in iron and steel, including decarbonization using hydrogen DRI technology, may make an important contribution.
- Transportation and emission costs should be reduced by reducing the export amount of cement and fertilizer. Net benefit should be increased in the domestic market, especially through the benefits arising from price effects.
- The use and production of green hydrogen/ammonia in
- fertilizer production has a significant potential for decarbonization in the medium term.
National Strategies
- Structural transformation should be addressed not only in production processes, but also from green transformation and energy transformation perspectives. The decarbonization road map should be developed with multiple alternative scenarios, taking into account the internal dynamics of the sectors. The net zero carbon road map should be compatible with Turkey's development priorities and integrate emission reduction strategies and circular economy approaches.
- Timing of the transformation is critical; Focus should be on the 2035-2040 maturity. Considering the international competitive conditions and similar policies developing both in the EU and other regions with the EU SKDM, it is important for Turkey to adapt early in order to maintain its competitiveness.
- Carbon pricing and ETS implementation can strengthen Turkey's position in the EU market. While carbon pricing reduces the carbon tax burden at the border, using local carbon tax revenues to finance the transformation can create an important resource.
- When designing a national ETS, it is important to balance domestic cost increases and competitiveness with the promotion of decarbonization.
- In order to reflect the emission costs arising from imported inputs to the countries of origin, the possibilities of national SKDM application for Turkey's imports should be evaluated.
- International cooperation and financing opportunities should be evaluated to support industrial transformation. Climate diplomacy and cooperation with other exporting countries affected by SKDM are critical for fair sharing of costs.
Source: EKOIQ
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