What Does Carbon Tax Mean? What are the Risks and Dangers Awaiting Turkey?

Carbon tax is a type of tax that countries apply to reduce greenhouse gas emissions and penalize the carbon dioxide emissions caused by businesses through economic methods. The burden of the tax increases or decreases with the amount of carbon dioxide released into nature. EU countries are among the countries we export the most to. Countries that implement national carbon taxes are in Europe; Finland, Iceland, Norway, Sweden, Denmark, Estonia, Latvia, Ireland, Slovenia, Switzerland, Poland, Portugal and the United Kingdom. Such studies continue in other EU countries. It is stated by those concerned that this process will be completed by 2026 at the latest. It is estimated that the carbon tax in question may cause producers who export to EU countries and cannot switch to low-carbon production methods and technologies to face a significant competitive disadvantage against producers who have made this transition and to lose the market.

Our country's industrialists have serious concerns about this issue. The necessary progress in this regard is made by transferring capital abroad, which is the easiest way due to bureaucratic obstacles and lack of technological financing. If I tell you about the best example of this, the situation of Borusan AŞ, which is one of the biggest companies in the world in its field, which is the pride of our country, you will understand the gravity of the issue better. Borusan decided to move its production facility in Gemlik to the USA, citing the EU's 'carbon tax' regulation. A "special situation notification" made by Borusan to the Public Disclosure Platform (KAP) was on the agenda. According to the notification published by the company on December 18, Borusan Holding was deciding to move the Gemlik Large Diameter Pipe Production Facility to the USA! He announced that the immovable machinery and equipment and the immovable properties of the factory will also be sold. According to the notification, the company acquired a company called Berg Pipe in the USA in April and will move its operations in Gemlik to the USA through this company. In summary, this company is dismantling the factory in Borusan Gemlik and moving it to the USA. He sells whatever is left. It is also reported in the press that Borusan invested 150 million dollars in the USA for this project.

We are talking about one of Turkey's largest industrial enterprises. Borusan Mannesman Boru Sanayi ve Ticaret AŞ, which is not the whole of Borusan Holding but only one of the companies belonging to the holding, is Turkey's 57th largest industrial enterprise in terms of sales from production and Turkey's 30th largest industrial enterprise in terms of exports. 2022 exports are 504 million dollars. So why? Despite all the support given to exporters and all the incentives given to the industry, why is one of Turkey's largest industrial enterprises leaving Turkey? It is difficult to answer this question properly in such a system where everything goes behind closed doors, but it is possible to draw conclusions based on the company's notification to KAP.

It is said in the notification; "Due to the excess supply of large-diameter pipes in Turkey and nearby geographies, increasingly stronger protectionist policies in foreign markets, and expectations that regulations such as carbon tax at the border, which may come into force in the near and medium term, will make international competition even more restrictive." They can find out by visiting the relevant holding company's page. These reasons may not be satisfactory for those unfamiliar with the subject. However, the details in the company's statement seem to give an idea about the future of Turkey. It is useful to go back 7 months to understand these details. The date is May 16, 2023. This This is happening while Turkey has left the first round of the two-round election behind and is completely focused on the second round. On that day, the regulation, including the regulation called "Border Carbon Regulation Mechanism (SKDM)", was published in the Official Journal of the European Union. According to this regulation, called SKDM in short. EU countries will look at the carbon emissions of the products they will import, and additional taxes will be collected based on the emission values. Thus, products with low carbon emission rates will enter the EU market cheaper, and products with high emission rates will enter the EU market more expensively. Naturally, businesses that do not reduce their carbon emissions will be eliminated from the EU market. So, when will this carbon tax regulation start? As of January 1, 2026. It is said that by that time, companies have to complete their transformation and establish carbon emission measurement systems in countries if they want to enter the EU market. The Turkish public could not realize the importance of the SKDM regulation, which came into force on May 16, due to the election agenda. Well, even though there is no election, the country's public opinion has closed its eyes to the world. But the data reveal the importance of the issue. Türkiye realizes 40 percent of its total exports to EU countries. The total size of goods and services exported from Turkey to the EU in 2022 is 103 billion dollars. If the carbon emission rate cannot be reduced and if Turkey can not show higher performance than that of rival countries  in this field, Turkey has no chance of holding on to this giant market!

The possibility of Turkey's exports, which have already been dragged into crises due to a chronic problem such as external deficit, being hit in this way is chilling. Then, there are two ways: The first is to step on the gas to complete this process called "green transformation" or to look for new markets instead of the EU market. Turkey's path is closer to the second. Because incentives continue to be given to coal-fired thermal power plants. Our tradesmen and industrialists do not have the vision required for transformation. SME owners do not have it. Even though there is a vision, financing is not enough. No one even dreams of green transformation in workshop-scale production in Organized Industrial Zones. "The Target of Green Transformation is Steel"

In this context, the steel industry is one of the sectors targeted by the European Green Deal. The energy with which you produce steel, whether you use renewable energy or coal-fired power plants when producing steel, where you obtain imported inputs, how much oil you consume while supplying, to what extent not only your company but also your suppliers have achieved this transformation, and much more are important in green transformation. . In other words, it is not enough for the company to do its best; it is also essential for suppliers and energy policy to transform. Therefore, a countrywide political stance is needed. However, almost all experts who follow the issue closely say that Turkey is extremely slow in green transformation. And this slowness threatens the steel industry the most. It should not be overlooked as steel. We are talking about the symbol sector of the production structure that changes both qualitatively and geographically in the world. The technology the industry needs for many of its products is at 20th century standards. Europe prefers to import products that require 20th century technologies for production, such as steel, from low-tech industrial countries such as Turkey. Moreover, environmental regulations are much more appropriate in Turkey. Ships containing asbestos can be dismantled in shipyards, and incentives continue to be given to coal mines that will melt steel. Instead of doing these, the EU prefers to import steel. Thus, the EU is constantly expanding the sector in Turkey with its steel demand. While the EU's share in Turkey's steel exports was 16 percent between 2010-2016, this rate increases to 25 percent between 2017-2020. The steel industry is growing even more during the pandemic and the EU's share in steel exports is 40 percent. Thus, the EU is becoming increasingly important for the steel industry. Borusan says that for the last 10 years, Europe has left steel production to countries like Turkey and there has been an excess steel supply in these countries. The sector has grown unplanned and it is now very difficult to predict the future. Because, the same Europe will start applying carbon tax at the border as of January 1, 2026. But Turkey's system is not successful in reducing carbon emission rates. Moreover, there is no planned decarbonization path that Turkey follows!

Borusan obviously said, "Let's move forward while the road is close." In this form, the relocation of Borusan's Gemlik Facilities to the USA is a warning to the Turkish economy regarding green transformation. But there is neither a government that will heed this warning nor a public that will heed this warning. The first reactions from the ruling party are along the lines of "let them go if they go."

with respectful love