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Yazar: Berika Özben
The number of emissions trading systems that stand out as an effective tool in the fight against environmental problems worldwide is increasing day by day. One of the objectives of the European Union's Emissions Trading System (EU ETS), revised under the European Green Partnership in 2021, is to encourage similar carbon regimes in other countries. The fact that the Border Carbon Regulation Mechanism will apply to products exported to the EU and that countries with an effective carbon regime will be free from the border carbon regulation mechanism will lead to an increase in the number of emissions trading systems worldwide in the coming years. In this article, we will look at how the EU ETS contributes to global sustainability efforts and its impact on Turkey, in particular, by addressing how it works.
EU Emissions Trading System
Established in 2005, the EU ETS is one of the most important instruments the EU uses in its fight against climate change. The ETS, which covers approximately 40 percent of EU emissions, aims to move to low-emission systems, in energy-intensive industries, without compromising their competitiveness, and to the 1.5 °C target set by the Paris Climate Agreement, thanks to cap and trade.
Functioning of the EU Emissions Trading System
The ETS is a market-based "cap and trade" system aimed at reducing greenhouse gas emissions. The operating stages are as follows:
In this process, the specified limit is reduced by the upper linear reduction factor (LRF), which is determined annually. There is a direct relationship between the LRF and the climate objective. The higher the LRF, the lower emissions are expected.
We can take an example to better understand the system. Let's think of the two facilities we call A and B. Both cause the same amount of greenhouse gas emissions per year. However, under the ETS, an introduced restriction and trade application, both plants must have 60 carbon quotas per year.
Both plants, which emit 100 tonnes of greenhouse gases a year, need to reduce their emissions by 40 tonnes to comply with the ETS. However, plant A can only reduce 20 tonnes due to investment costs, while plant B is achieving that target by reducing 60 tonnes.
In this case, plant A needs 20 coal quotas, while plant B has more than 20 coals. Under ETS, plant A can balance emissions by purchasing 20 carbon quotas from plant B at market carbon prices.
Benefits of the EU Emissions Trading System
The ETS provides many benefits from an environmental and economic perspective:
What does the EU Emissions Trading System and the proposed review mean to Turkey?
Carbon charges will be imposed on products exported to the EU under the Border Carbon Regulation Mechanism. These fees will be based on weekly fees in the EU ETS. In this context, the carbon charges in the EU ETS will be decisive in terms of the amount of taxes imposed on certain products exported from Turkey to the EU. Turkey must have a carbon regime similar to the EU ETS so that it does not pay taxes to the European Union under the Border Carbon Mechanism. If producers in Turkey effectively pay their taxes under the newly established emissions trading system, they will be exempt from the Carbon Regulation Mechanism at the Border.[1]
Conclusion
While the EU ETS offers an effective solution to environmental problems, in particular under the review of the European Green Partnership, it encourages the transition to low-emission systems. For Turkey, however, there is a need to switch to a carbon regime similar to the EU ETS in order to reduce the tax liability of the Carbon Regulation Mechanism at the Border. Turkey's effective implementation of this system could provide a competitive advantage in international trade and contribute to a sustainable future.
Resources
https://sonbuzulerimeden.blogspot.com/search?q=emisyon+ticaret+sistemi
[1] https://yesilbuyume.org/emisyon-ticaret-sisteminin-gozden-gecirilmesi/
