Theory Is Over, Real Numbers Have Arrived
When CBAM's definitive phase began on January 1, 2026, a question that Turkish exporters had debated for years finally started receiving a concrete answer: what will embedded emissions actually cost? The first two months of data are now in, and the picture is both encouraging and demanding of attention.
Under the CBAM Regulation (Regulation 2023/956, Article 21), certificate prices are indexed to the weekly average of EU Emissions Trading System (EU ETS) allowance prices. In other words, an EU importer purchasing a CBAM certificate pays the price set by Europe's carbon market. This linkage serves the fundamental purpose of extending the carbon cost that EU producers face to imported goods — the core mechanism for preventing carbon leakage.
In Q1 2026, EU ETS December 2026 futures traded between EUR 65 and EUR 80 per tCO2 on ICE and EEX platforms. The average price settled around EUR 72/tCO2 (ICE Endex, March 2026). This level is broadly in line with the "base case" scenarios used in most cost projections during the transitional period.
The Dynamics Behind the Price
The fact that CBAM certificate prices are mechanically indexed to the EU ETS does not mean the price formation is straightforward. Multiple dynamics that determine the EU ETS price directly shape CBAM costs:
Market Stability Reserve (MSR) effect. The EU ETS Market Stability Reserve withdraws allowances from circulation when the Total Number of Allowances in Circulation (TNAC) exceeds 833 million. In 2026, the MSR is projected to absorb approximately 220-250 million allowances (European Commission, 2025). This structural supply contraction supports allowance prices — and therefore CBAM certificate prices.
Surrender deadline pressure. The end of April 2026 is the deadline for EU ETS installations to surrender allowances for their 2025 emissions. Compliance purchasing intensifies during this period, driving seasonal price increases. The rise in EUA prices to the EUR 72-78 range in the second half of Q1 reflects this dynamic.
Macroeconomic conditions. EU industrial production levels, energy prices, and economic growth expectations all influence carbon demand. The moderate economic recovery in early 2026, combined with rising output in emissions-intensive sectors, is providing price support.
Sector-by-Sector Cost Analysis: The Turkey Perspective
Steel: The EAF Advantage Is Materializing
The structural advantage of the Turkish steel sector is clearly visible in the first real price data. According to the World Steel Association, approximately 70 percent of Turkish steel production takes place in electric arc furnaces (World Steel Association, 2024). EAF-based production has an average direct emission intensity of 0.4-0.6 tCO2/tonne — less than a quarter of the 1.8-2.2 tCO2/tonne average for integrated blast furnace (BOF) production.
At a reference price of EUR 72/tCO2, the concrete cost comparison:
| Origin | Production Method | Emission Intensity | CBAM Cost (EUR 72) | vs EU Producer |
|---|---|---|---|---|
| Turkey | EAF | ~0.5 tCO2/t | ~EUR 36/t | Lowest |
| Turkey | BOF (limited) | ~2.0 tCO2/t | ~EUR 144/t | High |
| Russia | BOF-dominated | ~2.1 tCO2/t | ~EUR 151/t | Highest |
| India | BOF-dominated | ~2.2 tCO2/t | ~EUR 158/t | Highest |
| EU (internal) | Mixed | ~1.4 tCO2/t | EUR 72/t (ETS) | Reference |
This table shows that Turkish EAF steel remains one of the most competitive options for EU imports even in a CBAM environment. However, the sustainability of this advantage depends on two factors: Turkey's electricity grid emission factor (which determines EAF indirect emissions) and the trajectory of renewable energy adoption.
Cement: Clinker Ratio Changes Everything
The cost equation in the cement sector is more complex. Approximately two-thirds of carbon emissions in cement production originate from the chemical process (calcification of calcium carbonate) and cannot be reduced through energy efficiency. The remaining third comes from fuel combustion.
The critical lever, however, is the clinker ratio. Turkish cement producers have made significant progress in recent years with clinker substitution strategies — using slag, fly ash, and limestone additions to reduce clinker share in blended cements. According to the Turkish Cement Manufacturers' Association, the sector's average clinker-to-cement ratio has fallen by approximately 5 percentage points over the past five years (TCMA, 2025).
| Product Type | Clinker Ratio | Emission Intensity | CBAM Cost (EUR 72) |
|---|---|---|---|
| Portland clinker | 95%+ | ~0.85 tCO2/t | ~EUR 61/t |
| CEM I (Portland) | ~90% | ~0.78 tCO2/t | ~EUR 56/t |
| CEM II (Blended) | ~70-75% | ~0.55 tCO2/t | ~EUR 40/t |
| CEM III (Slag cement) | ~30-50% | ~0.30 tCO2/t | ~EUR 22/t |
Shifting the product portfolio toward lower-clinker cements can cut CBAM costs in half. For cement companies exporting to the EU, the transition to CEM II and CEM III products is becoming a strategic priority.
Aluminium: Electricity-Driven Indirect Emissions Risk
The aluminium sector occupies one of the most exposed positions under CBAM. The intense electricity consumption of the electrolysis process can push indirect emissions well above direct emissions. The CBAM Regulation includes both direct and indirect emissions in the embedded emissions calculation for aluminium (Regulation 2023/956, Annex I).
Turkey's electricity grid emission factor is approximately 0.45 kgCO2/kWh (IEA, 2025). Given that aluminium production consumes approximately 14-16 MWh of electricity per tonne, indirect emissions alone can reach 6-7 tCO2 per tonne. This means the CBAM cost for aluminium is significantly higher than for other covered sectors.
Renewable electricity sourced through contractually verifiable PPAs has the potential to dramatically reduce this cost. According to the Commission's CBAM guidance document, the use of directly connected renewable energy can be factored into indirect emission calculations under certain conditions (European Commission CBAM Guidance, 2024).
Actual Data vs. Default Values: The Price Gap Has Materialized
Perhaps the most important lesson from the first two months is that exporters providing actual facility data are paying significantly less than those relying on default values.
The Commission's published default emission values are intentionally set above sector averages — not as a penalty, but as an incentive mechanism to encourage actual data submission. According to JRC (European Commission Joint Research Centre) technical reports, default values generally correspond to the upper quartile of sectoral distributions (JRC, 2023). This means well-managed facilities can achieve a cost advantage of 15 to 40 percent by providing actual data.
For example, the default value for steel is set at approximately 1.3 tCO2/tonne. When a Turkish EAF steel producer reports actual data of 0.5 tCO2/tonne, the CBAM cost per tonne drops from EUR 94 to EUR 36 — a 62 percent saving.
The Verification Bottleneck: An Unexpected Challenge
One of the surprise developments of Q1 was the insufficient capacity of accredited verifiers. The definitive phase requires embedded emissions data to be verified by accredited verifiers (Regulation 2023/956, Article 8). However, the number of verifiers accredited for CBAM — particularly those serving Turkey — is limited.
This bottleneck meant some exporters who had actual facility data ready could not submit verified data and were forced to rely on default values — effectively paying higher costs. The strategic importance of contracting with a verifier early was confirmed once again by this experience.
EU ETS Price Volatility and Planning Challenges
The link between CBAM certificate prices and weekly EU ETS averages creates planning uncertainty for exporters. In Q1, the EU ETS price fluctuated between EUR 65 and EUR 80 — a 23 percent band width. This volatility makes CBAM cost budgeting difficult.
As a practical approach, building budgets around a EUR 70-75/tCO2 reference price with a 15-20 percent upside margin is a reasonable strategy for the first year. Monitoring EU ETS price trends monthly and conducting quarterly budget revisions makes volatility risk manageable.
What to Watch in the Coming Months
- April 2026 surrender period: Impact of EU ETS compliance buying on CBAM prices
- Commission's H1 2026 CBAM assessment: Analysis of the first six months of implementation data
- TR-ETS pilot developments: Progress on Turkey's carbon pricing and implications for the CBAM deduction mechanism
- Verifier capacity growth: Expected easing of the bottleneck with new accreditations
- Natural gas prices: Impact of TTF price movements on EU ETS prices through coal-to-gas switching dynamics
Action Item: Q1 data shows CBAM costs are not a theoretical risk — they are a concrete line item. For exporters who have not yet transitioned to actual facility data, the most urgent step is building MRV infrastructure to deliver verified data. Every quarter spent relying on default values is money left on the table, shortening the payback period for that investment.
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