One of the most critical mechanisms emerging in this context, the Carbon Border Adjustment Mechanism , is a regulation designed to prevent carbon leakage and reduce competitive differences arising from carbon-intensive production by effectively extending carbon pricing beyond the borders of the European Union.
During the transitional period between 2023 and 2025, the system was mainly based on reporting. However, as of January 1, 2026, CBAM has entered its financial phase. With this transition, carbon has moved beyond being merely a reported parameter and has become a direct cost element that generates financial impact in trade.
For energy-intensive sectors such as steel, this development represents not only a new environmental regulation but also a transformation that reshapes competitive dynamics in international trade. Ekonomim conducted an interview with Fatih Gökçe, CSO of Diler Holding Iron and Steel Group, to examine the effects of this mechanism on the steel sector and the preparation processes of companies.
Will the transition of CBAM into its financial phase change the perspective of the steel sector?
In its initial years, CBAM was designed as a learning period. Between 2023 and 2025, companies focused on improving embedded emissions reporting, and no financial obligations were imposed during this period.
However, the situation is changing as of 2026. CBAM certificates will need to be purchased for carbon-intensive emissions embedded in products imported into the European Union. Since the price of these certificates is linked to the EU ETS carbon price, carbon cost has become a direct component of trade pricing.
This is particularly important for the steel sector. Competition will no longer be shaped solely by production costs, but also by carbon intensity.
What does the concept of “embedded emissions” mean under CBAM?
The core of CBAM lies in the concept of embedded emissions. This refers to the total greenhouse gas emissions generated throughout the production process of a product.
In steel production, these emissions arise from three main sources:
direct emissions from production processes
indirect emissions from electricity consumption
emissions embedded in certain intermediate inputs used in production
In this way, CBAM introduces a more comprehensive carbon accounting approach that covers not only production technologies but also the carbon profile of energy use and raw materials.
How are “precursors” treated under CBAM?
With CBAM, the emission impact of intermediate inputs used in steel production becomes more visible. Inputs such as pig iron, HBI/DRI, and externally sourced semi-finished products are directly included in the total emissions calculation of the final product.
This means that even if production technology is low-emission, carbon-intensive inputs can significantly increase total emissions.
Therefore, with CBAM, not only production processes but also raw materials and the entire supply chain become integral parts of competition.
Why is the difference between default values and verified emissions data so critical?
Under CBAM, emissions data can be calculated in two ways:
verified actual data
default emission values
Producers can base their calculations on facility-specific actual production data. These data must be reported in accordance with CBAM rules and verified by independent accredited verification bodies. The resulting values reflect the actual emissions of the product.
Default emission values are reference values used when producers cannot provide verified data. In such cases, calculations are based on these values, which may create a cost disadvantage, particularly for low-emission producers.
In the current system, these values are often based on sector averages. Therefore, facilities such as electric arc furnaces, which generally have lower emissions, may be assessed based on higher emission values that do not reflect actual production conditions if verified data is not provided.
The same applies to precursor inputs. If their emission data cannot be verified, the system automatically applies default values. As a result, producers must manage not only their own facility emissions but also the emissions data of inputs across their supply chains.
Producers who cannot verify their data cannot control their carbon costs.
Why is the verification process becoming critical?
Under CBAM, emissions data must be verified by independent accredited organizations. This verification process goes beyond a simple technical review and constitutes a comprehensive and formal structure carried out in line with methodologies and standards defined by the European Union.
The verification process is not limited to emission calculation methods; it also includes an integrated assessment of data sources, production parameters, and the entire data collection process.
Therefore, it is no longer sufficient for companies to simply generate data. The data must be traceable, documented, and verifiable in accordance with international standards.
Why is verification capacity considered a risk?
One of the most significant bottlenecks in CBAM implementation in the coming period is the capacity of verification bodies. For emissions data to be considered valid, verification must be carried out by organizations accredited under EU regulations. However, it may not be practically possible for verification bodies in Europe to serve all countries simultaneously.
On the other hand, establishing and accrediting verification bodies in non-EU countries requires time. Moreover, the need for verification arises simultaneously not only in steel but also in other carbon-intensive sectors such as aluminum, cement, and fertilizers.
For this reason, verification capacity may become a serious bottleneck in the early years of CBAM. In the absence of verified emissions data, producers may have to rely on default values, which can create significant cost disadvantages, especially for low-emission producers.
Therefore, it is not sufficient for companies to establish emissions calculation systems alone. Planning verification processes at an early stage is of critical importance.
What factors will determine CBAM costs?
The carbon cost under CBAM is fundamentally calculated by multiplying the number of CBAM certificates required by the EU carbon price.
However, the number of certificates is not determined solely by the emission intensity of the product. Factors such as embedded emissions, whether data is verified or based on default values, the gradual removal of free allocations under the EU Emissions Trading System, transition factors, and any local carbon pricing already paid in the country of production all affect the total cost.
In addition, the quality of reference emission values used in CBAM calculations remains a subject of discussion within the sector. Even small differences in emissions can significantly affect total carbon costs in high-volume trade.
For this reason, it is more realistic for companies to evaluate CBAM costs within a range rather than as a single figure.
What kind of transformation will occur in supply chains?
With CBAM, carbon intensity is becoming a new competitive parameter in supply chains. Importers in Europe are now focusing not only on price and quality but also on the carbon footprint of the products they source.
This is leading to an increasing preference for low-emission producers. Similarly, the demand for verified emissions data from producers is becoming more widespread.
Recently, providing verified emissions data has become an integral part of new sales contracts for many European customers.
Carbon data is no longer only a subject of sustainability reporting; it is also becoming a direct component of commercial negotiations.
What happens if compliance is not achieved?
According to CBAM regulations, failure to submit emissions declarations or submitting incorrect declarations may result in significant financial penalties.
However, the main risk is not limited to financial sanctions. If non-compliance becomes systematic, companies may face serious difficulties in accessing the European Union market.
At this point, CBAM is no longer just an environmental regulation; it has become a critical requirement for access to the EU market.
What should steel producers do to prepare for CBAM?
With CBAM, carbon management is becoming a strategic priority for the steel sector.
Companies should focus on the following areas:
emissions data management and verification processes
analysis of the carbon profile of the supply chain
low-carbon energy and production strategies
CBAM is not only a carbon regulation; it is also a next-generation trade mechanism redefining the rules of competition in global industry.
In the coming period, competition in the steel sector will be shaped not only by production costs but directly by carbon costs.
It is no longer sufficient to simply produce steel. The ability to implement integrated systems that measure, verify, and effectively manage the carbon data of produced steel will be decisive.
Perhaps the most important question that will determine competition in the steel sector in the coming years will be:
Will companies that can manage carbon costs stand out, or will low-carbon production become the new industry standard?
Source:Ekonomim
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