COP31 and the Carbon Border Adjustment Mechanism: A New Era of Trade for the Steel Industry
Global climate policies are changing not only industrial production, but also the conditions of international trade. Regulations designed to reduce greenhouse gas emissions are increasingly bringing the carbon emissions associated with manufacturing processes into the assessment of products, alongside price, quality and delivery conditions.
The European Union’s Carbon Border Adjustment Mechanism, known as CBAM, is an important example of this transition. The mechanism aims to take into account the embedded emissions associated with the production of certain goods imported into the European Union.
COP31 takes place in Antalya, Türkiye, from 9 to 20 November 2026. CBAM was not created as part of COP31. However, both developments illustrate the growing relationship between climate policy, industrial production and international trade.
The iron and steel sector is directly connected to CBAM because certain iron and steel products are within its scope. For steel exports to the European Union, product classification, embedded-emissions calculations, data reliability and compliance with applicable rules are becoming increasingly important.
What Is the Carbon Border Adjustment Mechanism?
The Carbon Border Adjustment Mechanism is the European Union’s carbon-pricing mechanism for embedded emissions associated with the production of certain imported goods.
One of its main purposes is to reduce the risk of carbon leakage. Carbon leakage occurs when production moves from a region with stricter climate policies to regions with lower carbon costs, or when more carbon-intensive imports replace domestic production.
CBAM aims to connect the carbon cost of certain imported goods with the EU Emissions Trading System, or EU ETS. It is not a general carbon tax applied to all imported products. Its scope is defined by product classifications and applicable legislation.
What Is the Relationship Between COP31 and CBAM?
COP31 is an international climate conference held under the United Nations Framework Convention on Climate Change. CBAM is a regulatory mechanism established by the European Union.
CBAM is not a decision adopted at COP31 and is not specific to COP31. However, the two subjects are connected through the broader impact of climate policies on industrial activity, trade and competitiveness.
Considering CBAM in the COP31 context helps explain how climate objectives can influence international trade and industrial transformation.
When Did CBAM Enter Into Force?
CBAM’s transitional period began on 1 October 2023 and ended on 31 December 2025. During this period, the main requirement was reporting emissions information associated with imports of covered goods.
The definitive CBAM regime began on 1 January 2026. Under the definitive regime, relevant EU importers or indirect customs representatives may need authorisation, annual declarations and CBAM certificates.
The first annual CBAM declaration for 2026 imports, together with the surrender of the corresponding certificates, is due by 30 September 2027.
Which Sectors Are Covered by CBAM?
CBAM currently applies to selected goods in the following sectors:
- Iron and steel
- Aluminium
- Cement
- Fertilisers
- Electricity
- Hydrogen
Not every product manufactured by businesses in these sectors is automatically included. The scope of CBAM is determined through the Combined Nomenclature, or CN, codes listed in the legislation.
For this reason, it is not enough to assess coverage based only on a product’s commercial name or the sector in which it is produced.
Why Does CBAM Directly Affect the Steel Industry?
Steel is a fundamental material used in transport, energy, construction, machinery and industrial infrastructure. The greenhouse gas emissions associated with steel production can vary depending on production technology, energy sources and raw materials.
For imports of certain iron and steel products into the EU, calculating embedded emissions is important. Two products with similar technical characteristics may have been produced through different processes and may therefore have different emissions profiles.
However, the CBAM emissions value of a product cannot be determined solely from the name of the technology used. Compliance requires calculations based on applicable rules and reliable production data.
How Could CBAM Affect Steel Producers in Türkiye?
For exports of CBAM-covered steel products from Türkiye to the European Union, the obligations of the EU importer are particularly important.
Annual declaration and certificate-surrender obligations are generally carried out by the relevant EU importer or authorised indirect customs representative. Producers in Türkiye may support the process by preparing and sharing information on the embedded emissions of their products.
It should not be assumed that every Turkish steel producer is directly required to purchase CBAM certificates. The legal responsibility depends on the structure of the transaction and the relevant importer’s obligations.
What Are Embedded Emissions Under CBAM?
Embedded emissions are greenhouse gas emissions associated with the production of a good and included under CBAM calculation rules.
The production stages and emissions sources considered may vary according to the product group and the applicable rules. A corporate carbon footprint is not the same as a product-level CBAM embedded-emissions calculation.
Knowing an organisation’s total emissions does not necessarily mean that CBAM-compliant data is available for each product.
How Are Direct and Indirect Emissions Addressed Under CBAM?
Direct emissions arise from sources within a production facility during manufacturing activities.
Indirect emissions may include, under defined conditions, emissions associated with the generation of electricity used in production. The treatment of emissions can differ depending on the product and the applicable CBAM rules.
The same approach does not apply to all CBAM goods. For iron and steel products, the relevant sector guidance and current calculation rules should be used.
Why Are Actual Emissions Data Important?
Under conditions allowed by the legislation, CBAM declarations may use actual emissions data or default values.
Actual data is calculated using information obtained from production processes and may be subject to verification requirements. Default values are reference values established under the regulatory framework.
Actual values should not automatically be assumed to be lower than default values. The primary objective should be to produce data that is accurate, traceable and compliant with applicable rules.
How Are CBAM Emissions Data Verified?
Under the definitive regime, using actual emissions data may trigger verification requirements.
Production records, energy consumption, raw material data and calculation methodologies are important in this process. Verification is not limited to internal company controls; accredited verifiers may have a role under the applicable legislation.
A producer’s activity in preparing data should be distinguished from formal verification obligations.
What Is a CBAM Certificate?
A CBAM certificate is the regulatory instrument used to apply a carbon cost to embedded emissions.
Authorised CBAM declarants purchase and surrender certificates in accordance with their obligations. Certificate pricing is linked to EU ETS allowance auction prices. In 2026, the price is calculated using quarterly averages; from 2027 onward, weekly averages apply.
Embedded emissions, free-allocation adjustments and, where applicable, a carbon price effectively paid in the country of origin can affect the calculation.
What Does the 50-Tonne CBAM Threshold Mean?
The 50-tonne threshold is a single annual, mass-based threshold applied to an importer’s cumulative imports of covered goods in the relevant sectors.
The threshold applies to iron and steel, aluminium, cement and fertilisers. It should not be interpreted as a threshold for a single shipment.
Where the importer’s cumulative annual imports exceed the threshold, the importer may be subject to CBAM obligations for all relevant covered goods imported during that year. Electricity and hydrogen are subject to different rules.
How Can CBAM Affect Carbon Costs?
CBAM can affect the total commercial cost of certain imported goods by linking embedded emissions to carbon pricing.
The impact can vary according to the product’s embedded emissions, CBAM certificate prices, free-allocation adjustments and other applicable rules. Contractual arrangements between commercial parties may also determine how the cost is allocated.
Instead of assuming a fixed cost, companies should assess CBAM exposure by product and transaction.
What Is the Relationship Between CBAM and the EU Emissions Trading System?
The EU Emissions Trading System is a mechanism designed to limit and price emissions in certain sectors.
CBAM complements the EU ETS by taking the carbon cost of embedded emissions into account for selected imported goods. The obligations under the two mechanisms are not identical.
The gradual implementation of CBAM is linked to the gradual phase-out of free allowances under the EU ETS for relevant sectors.
Is Carbon Pricing in Türkiye Important for CBAM?
Under certain conditions, a carbon price effectively paid in the country of production for the relevant embedded emissions may be taken into account under CBAM.
However, not every environmental tax is automatically deductible from CBAM certificate obligations. The nature of the carbon price, evidence that it was effectively paid and appropriate documentation are important.
Current and future carbon-pricing mechanisms in Türkiye should be assessed separately under EU rules.
How Could CBAM Affect Competition in the Steel Sector?
In international steel trade, carbon data and carbon-related costs may become more important alongside price, product quality, delivery time and technical requirements.
However, CBAM should not be assumed to provide an automatic competitive advantage to any producer or country. Energy prices, logistics, production costs and trade policies also influence competitiveness.
Could the Scope of CBAM Expand in the Future?
The European Union continues to assess possible developments in CBAM coverage. Certain iron- and steel-intensive downstream products are among the areas considered for future development.
A proposed expansion should not be confused with a rule already in force. A product is not automatically covered simply because it is included in a policy discussion or legislative proposal.
How Does Digitalisation Support CBAM Compliance?
Systematic management of energy consumption, raw material use, production volumes and emissions data can support CBAM calculations.
Digital systems can make it easier to collect, monitor and report relevant information. However, digitalisation alone does not guarantee compliance. Calculation methods, data quality and verification requirements must also be assessed.
What Should Steel Producers Consider During the CBAM Compliance Process?
Steel producers should first assess whether their products are in scope by checking the relevant CN codes.
They should then evaluate:
- Required product-level emissions data
- Data quality and traceability
- Data-sharing processes with EU importers
- Applicable calculation methodologies
- Verification requirements
- Contractual responsibilities and trade arrangements
A single compliance plan may not be suitable for every producer. Product groups, production technologies and commercial relationships can differ significantly.
COP31 and CBAM: The Importance of Carbon Data in the Future of Steel Trade
CBAM is an important example of how climate policies are influencing international trade.
For the iron and steel sector, it increases the importance of product-level emissions data, traceability, verification and regulatory compliance. The impact is not limited to carbon costs. It also affects data management, supply-chain relationships and long-term production planning.
In the COP31 context, CBAM demonstrates how climate goals can be linked to industrial and trade policies. For steel producers and exporters, reliable carbon data is becoming an increasingly important part of market readiness.
COP31 and CBAM: Frequently Asked Questions
COP31 and CBAM discussions highlight how climate policies can affect steel trade, emissions reporting and market-access requirements. Below are answers to frequently asked questions about CBAM, embedded emissions and the EU steel market.
What is CBAM?
CBAM is the European Union’s mechanism for considering embedded emissions in certain imported goods through carbon pricing.
Is CBAM the same as SKDM?
Yes. CBAM is the English abbreviation for Carbon Border Adjustment Mechanism. SKDM is the Turkish abbreviation for Sınırda Karbon Düzenleme Mekanizması.
When did CBAM start?
The transitional period began on 1 October 2023. The definitive regime began on 1 January 2026.
When are CBAM certificates required?
For 2026 imports, the first annual declaration and surrender of corresponding certificates are due by 30 September 2027.
Does CBAM cover the steel industry?
Yes. CBAM covers selected iron and steel products identified through the CN codes listed in the applicable legislation.
Are steel producers in Türkiye required to buy CBAM certificates?
Certificate obligations generally apply to the relevant EU importer or authorised indirect customs representative. Producers in Türkiye may need to provide embedded-emissions data to support the importer’s compliance process.
What is the 50-tonne CBAM threshold?
It is an annual, importer-level cumulative net-mass threshold that applies to certain covered sectors. It is not a per-shipment threshold.
Is CBAM the same as a corporate carbon footprint?
No. CBAM involves product-level embedded-emissions calculations and specific regulatory obligations. A corporate carbon footprint measures emissions at the organisation level.
What is the relationship between CBAM and COP31?
CBAM was not created at COP31. Both are linked to the broader effect of climate policy on industrial production, trade and decarbonisation.
