Türkiye could raise up to €1.5 billion annually through domestic carbon pricing and use the proceeds to help finance cleaner steel production, a study by Agora Industry, the Istanbul Policy Center and the Sustainable Energy and Finance Association (SEFiA) estimates. Published on 3 November, the report says domestic pricing could help the country’s emissions-intensive exporters remain competitive in European markets as the EU Carbon Border Adjustment Mechanism (CBAM) puts pressure on carbon-intensive trade.
The study estimates that domestic emissions trading combined with carbon-border policies could generate revenue broadly matching the steel industry’s annual decarbonisation investment requirements over the next two decades. The proposed funding would depend on Türkiye establishing an effective carbon-pricing system, setting up collection arrangements and deciding to allocate the revenue to industrial transition.
Its report, “Transforming Türkiye’s Steel Industry: A Roadmap to Net Zero by 2053,” assesses three industrial transition scenarios through 2050. Under the accelerated pathway, steel-sector emissions could fall by 92% between 2025 and 2050, with renewable electricity, electric-arc-furnace production, hydrogen-based direct-reduced iron and increased recycling of domestic scrap supporting the shift. The transition could create up to 29,000 jobs in renewable power, electrolyser manufacturing and hydrogen-based ironmaking.
Carbon prices and CBAM treatment
The researchers estimate that steel made using domestically manufactured gas-based iron could reach cost competitiveness with coal-based production at a carbon price of approximately €100/tCO₂. Hydrogen-based steel could reach similar competitiveness at around €140/tCO₂, assuming the technology and energy costs modelled in the study. Both figures are projected break-even levels, not carbon prices currently imposed on Turkish steelmakers.
Effective domestic pricing could allow Türkiye to retain carbon revenue that might otherwise be reflected in CBAM charges on exports to the European Union, the report says. Under EU rules, qualifying carbon prices effectively paid in the country of production can reduce the CBAM certificates European importers must surrender, subject to supporting evidence and applicable deductions. The benefit depends on the price actually paid, verification requirements and the legal treatment of the emissions concerned.
The study warns that a weaker domestic carbon price could make lower-emission iron imports from the Middle East and North Africa more attractive than investment in domestic primary production. Such imports could reduce near-term transition costs while increasing reliance on imported inputs. Türkiye is the world’s seventh-largest steel producer, and electric-arc-furnace production gives it an existing technological advantage in some market segments.
Implications for regional industry and finance
The findings offer Serbia, Montenegro and other Western Balkan economies a framework for assessing industrial carbon pricing. Regional policymakers face a choice between allowing EU carbon-border obligations to raise the effective cost of exports and developing domestic mechanisms that retain carbon revenue for industrial investment.
Banks financing steel decarbonisation should distinguish forecast carbon-tax receipts from committed government funding, the report says. It argues that carbon pricing can finance industrial modernisation only if revenues are retained and investment policies reduce the risks of new technology.