What Is CBAM (Carbon Border Adjustment Mechanism)? A Step-by-Step Compliance Guide for Exporters

The Carbon Border Adjustment Mechanism (CBAM), one of the most critical tools of the European Union's Climate Package ("Fit for 55"), entered the agenda of every manufacturer exporting to the EU when its transition period began in October 2023. As of 1 January 2026, the transition period will end and CBAM will begin to operate as a de facto carbon tax. In this article, we examine CBAM's scope, how embedded emissions are calculated, reporting obligations and the steps to take during the transition period in concrete terms.

What Is CBAM and Why Does It Matter Now?

The Carbon Border Adjustment Mechanism is a measure introduced to ensure a level competitive playing field with EU producers, applied against the greenhouse gas emissions released during the production of certain carbon-intensive goods imported into the EU. The core logic of the mechanism is this: if there is no carbon price in the country where the imported product is made, or if it is lower than the EU ETS price, the difference will be offset by the importer purchasing a "CBAM certificate".

For Turkish manufacturers, the significance of the regulation emerges in two respects:

• Direct cost impact: An additional cost will arise based on the embedded emissions of iron and steel, aluminium, cement, fertiliser, hydrogen and electricity products exported to the EU.
• Data and reporting obligation: The importing EU company will request verified emissions data from its supplier (i.e. the Turkish manufacturer). Where this data is unavailable, default values will be applied and costs will rise.

CBAM is not merely a carbon tax; it is also an obligation for Turkish exporters to prove the maturity of their carbon management to international markets.

Which Products and Sectors Are in Scope?

The sectors and product groups falling within CBAM's scope during the transition period (2023-2025) and beyond are as follows:

By 2030, the scope is planned to expand to cover organic chemicals, polymers and other carbon-intensive product groups as well.

How Are Embedded Emissions Calculated?

At the heart of CBAM lies the concept of "embedded emissions". This is the expression, in tonnes of CO2e, of the greenhouse gas emissions released directly or indirectly during a product's production process.

Direct Embedded Emissions

These are emissions arising directly from production processes at the manufacturing facility. For example, blast furnace emissions in steel production, limestone calcination in cement production, and anode consumption in aluminium.

Indirect Embedded Emissions

These are emissions arising from the generation of the electricity consumed in production. During the transition period, indirect emissions reporting is mandatory in some sectors and optional in others.

Calculation Methodology

Embedded emissions are calculated with an approach similar to the ISO 14067 product carbon footprint standard, but within the method boundaries defined specifically for CBAM:

1. Defining installation boundaries: Which stages of the production processes are defined as the "installation" is determined; inputs and outputs are clearly separated.

2. Collecting activity data: Data for a specific reference period is compiled for fuel consumption, electricity consumption, raw material inputs and process emissions.

3. Assigning emission factors: National inventory, IPCC guidelines or installation-specific measurement values are used for each input.

4. Allocation method: If more than one product is made at a single installation, emissions are allocated to products on the basis of mass, energy content or economic value.

5. Verification: After the transition period, calculations are verified by independent verifiers accredited by TÜRKAK or an equivalent accreditation body.

Reporting Obligations: During and After the Transition Period

During the transition period from October 2023 to December 2025, the EU importer must submit a "CBAM Report" each calendar quarter. The report includes the quantity of the imported product, the amount of embedded emissions (tonnes CO2e) and any carbon price paid in the country of origin.

From 1 January 2026 onwards:

• The importer must be an "authorised CBAM declarant" registered with the EU CBAM Authority.
• Annual reporting is carried out by 31 May for the emissions of the previous calendar year.
• CBAM certificates corresponding to the declared emissions are purchased. The certificate price is tied to the weekly average EU ETS price.
• If a carbon price paid in the country of origin is proven, the amount paid is deducted and netted off.

Preparation Steps for Turkish Exporters

As we enter the final quarter of the transition period, a practical roadmap for Turkish manufacturers operating in CBAM-covered sectors can be summarised as follows:

1. Product portfolio screening: It is clarified which products fall under CBAM and under which HS code; the share of exports to the EU market is calculated.

2. Building data infrastructure: A data system is established that can track production data, energy consumption, fuel use and process parameters on a product basis.

3. Pilot emissions calculation: A pilot calculation in line with the CBAM methodology is carried out for one installation or product group; gaps in the data are identified.

4. Preparing for independent verification: The calculation results are field-tested with a TÜRKAK-accredited independent verifier.

5. Data sharing with the EU importer: Verified emissions data is delivered to your customer in the EU in a standard format (the CBAM Communication Template).

6. Carbon management strategy: Energy efficiency, renewable energy and process optimisation investments are planned to reduce carbon intensity over the long term.

Frequently Asked Questions

1. Does CBAM only affect companies that export to the EU?

   It places the obligation directly on the EU importer; however, because the importer requests emissions data from its supplier, the Turkish manufacturer, end-to-end management of the process covers the entire supply chain. A manufacturer that cannot provide data as a supplier may lose its contractual advantage, since default values would create additional costs for its customer.

2. With no ETS currently in place in Türkiye, how is a paid carbon price proven?

   There is not yet an operational ETS in Türkiye; however, national ETS work is under way within the scope of the Green Deal Action Plan. Under current conditions, it is assumed that no carbon price has been paid on the product the Turkish manufacturer sells to the EU, and the full CBAM obligation arises.

3. Does a reporting failure during the transition period also lead to penalties?

   Yes. From the start of 2024, if the importer fails to submit the quarterly CBAM report, it faces an administrative fine ranging from 10 to 50 euros per tonne of CO2e. Transition-period reporting is therefore not merely informational but a legal obligation.

4. Which GHG Protocol is taken as the basis in the calculation?

   CBAM defines its own methodology through product-specific regulations published by the EU; however, it is largely aligned with the IPCC 2006 guidelines and the ISO 14064-1/14067 standards. For this reason, if an installation already has an ISO 14064 inventory, the transition to a CBAM calculation is much faster.

5. How does Proses Consulting support the CBAM process?

   With our TÜRKAK-accredited team, we provide end-to-end CBAM compliance services including product portfolio scoping, data infrastructure setup, embedded emissions calculation (ISO 14064/14067 compliant), preparation for independent verification and data sharing with the EU importer.