A carbon border tax could be against the WTO rules: Dalbeler

The European Commission’s plans to put a carbon border adjustment tax on steel could be against the World Trade Organization (WTO) rules, according to Ugur Dalbeler, vice president of the Turkish Exporters’ Association (CIB) and CEO of major Turkish steel producer Colakoglu.

“As the EU’s share in overall Turkish steel exports is around at 35-40%, this kind of an additional [trade] measure will have another negative effect on export volumes,” Dalbeler said, adding that due to the customs union and ECSC free trade agreements between EU and Turkey, Turkey should be exempted.

Veysel Yayan, general secretary of the Turkish Steel Producers’ Association (TCUD), also told Platts Oct. 5 that all measures should be in compliance with WTO rules.

“As Turkish mills’ are already investing in green steel, I don’t think that a carbon border adjustment will have a significant effect on our exports to the EU,” Yayan said, adding that the renewable energy support mechanism (YEKDEM) in Turkey is already notably increasing Turkish mills’ energy costs.

The European Green Deal that was presented by the EC at the end of 2019 aims to make Europe the first continent to be carbon-neutral by mid-century.

EU steel producers have called on the EC to introduce tariffs on imports from steel producers in countries that are not subject to the same types of emissions controls that they are. The EC has already started public consultations about the carbon border adjustment mechanism (CBAM).

A CBAM would ensure that the price of imports reflects more accurately the carbon content of production, the EC said, adding that this measure will be designed to comply with World Trade Organization rules and other international obligations of the EU.

According to a recent report by Turkish Industry and Business Association (TUSIAD), Turkey’s top business association, seen by S&P Global Platts, introduction of carbon border adjustment taxes by the EU, could bring an additional cost of Eur1.08 billion to Turkey’s manufacturing sector, including iron and steel. This cost could be as high as Eur110 million for the Turkish steel sector, the report said.

A carbon border tax could also harm Turkish mills’ competitiveness in the EU market. As of the first seven months of the year, Turkish mills’ steel exports to the EU already declined by 26% on year to 2.8 million mt, amid the pandemic and restrictive trade measures. Quotas, anti-dumping and countervailing duty investigations could deepen this decline in the coming months of the year.

— Cenk Can