CBAM 2026: Why European Companies Are Investing in Turkey’s Renewable Energy
The Carbon Border Is Now a Business Reality
On 1 January 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) entered full force. For years, it was a policy debate. Now, it is a line item on every procurement manager’s spreadsheet. Companies exporting steel, aluminium, cement, fertilisers, electricity, and hydrogen into the EU must demonstrate the embedded carbon of their products — and pay the difference if it exceeds EU carbon pricing.
For businesses operating in or sourcing from Turkey, the implications are immediate. Turkey sends approximately 40% of its total exports to the EU, and an estimated 41% of that trade falls within CBAM’s scope. If those goods are produced using fossil-based energy, the carbon certificate costs can erode margins significantly — in some sectors, turning a profitable export into a loss-making one.
The response from forward-thinking companies is increasingly the same: invest in renewable energy in Turkey, now.
Which Sectors Are in CBAM’s Crosshairs?
CBAM initially targets six sectors:
- Steel and iron — Turkey is one of the EU’s largest steel suppliers
- Aluminium — high electricity intensity makes this sector especially vulnerable
- Cement — embedded carbon is difficult to reduce without clean energy
- Fertilisers — production relies on natural gas; green hydrogen alternatives are emerging
- Electricity — cross-border power flows subject to carbon accounting
- Hydrogen — green hydrogen increasingly required by EU buyers
From 2026 onwards, Turkish exporters must purchase CBAM certificates equivalent to the carbon price they would have paid under the EU Emissions Trading System (EU ETS). As the EU ETS carbon price rises — currently hovering above €60–70 per tonne — the cost of doing nothing grows every year.
What This Means for Turkish Manufacturers
The transition period (2023–2025) is over. Reporting was mandatory; financial liability was not. From 2026, the financial obligations are real.
Consider a mid-sized steel mill exporting 500,000 tonnes of steel to the EU annually. At a carbon intensity of 1.8 tCO₂/tonne of steel and an EU ETS price of €65/tonne, the annual CBAM cost could reach €58.5 million. Switch to green electricity under a corporate Power Purchase Agreement (PPA), and that liability shrinks dramatically.
This is why Turkey’s largest energy-intensive manufacturers — from Iskenderun steel producers to İzmir petrochemical plants — are accelerating their renewable energy transition. They are not doing it for sustainability branding. They are doing it for financial survival.
The Strategic Opportunity for European Investors
Here is where the picture shifts from challenge to opportunity.
European companies that source from Turkey, operate manufacturing facilities there, or wish to establish carbon-compliant supply chains have a direct incentive to invest in Turkish renewable energy. The economics are compelling:
- Turkey’s solar irradiance exceeds 2,500 hours per year — among the highest in the region
- Levelised Cost of Energy (LCOE) for solar in Turkey: USD 30–40/MWh — significantly below the EU average
- YEKA auctions offer USD-denominated feed-in tariffs for 10 years — a natural hedge against lira volatility
- The new “Super Permit” reform has cut permitting timelines from 4 years to under 2 — reducing development risk
For a European company with manufacturing exposure in Turkey, building or contracting a renewable energy facility is no longer a corporate social responsibility exercise. It is a margin-protection strategy.
Corporate PPA Models: The Fastest Route to Clean Energy
Not every investor wants to own a power plant. Corporate Power Purchase Agreements (PPAs) offer a structured alternative.
Under a physical PPA, a company contracts directly with a renewable energy generator to buy electricity at a fixed price over 10–15 years. The generator delivers power to the grid; the buyer receives equivalent clean energy and, crucially, a YEK-G certificate (Turkey’s Renewable Energy Source Guarantee of Origin) for every megawatt-hour consumed.
Under a virtual PPA (VPPA), the financial settlement is separate from physical energy delivery — useful for multinationals whose Turkish operations are spread across multiple grid points.
A third model, the sleeve PPA, uses a licensed energy supplier as intermediary, which can simplify regulatory compliance for foreign companies unfamiliar with Turkey’s energy market structure.
YEK-G certificates are recognised for Scope 2 emissions accounting under the GHG Protocol, and are increasingly accepted by EU CBAM verification bodies as evidence of renewable electricity consumption. Without them, a factory’s electricity is presumed to be fossil-based for CBAM purposes.
Carbon-Neutral Factory Investment: The Integrated Approach
The most comprehensive response to CBAM combines several elements:
| Component | Purpose | Typical Scale |
|---|---|---|
| Rooftop or ground-mounted solar (GES) | On-site clean generation | 1–10 MW per facility |
| Battery Energy Storage System (BESS) | Manage peak demand, improve self-consumption | 0.5–2 MWh per MW |
| YEK-G certified electricity supply | Cover remaining consumption | Bespoke contract |
| ESCO/EPS financing model | Zero CAPEX for the factory | Project financed by developer |
Under the ESCO (Energy Services Company) model — one of Intercon’s core service areas — the investor provides the capital and installs the renewable system. The factory pays a share of its energy savings over the contract period (typically 7–12 years), after which the system transfers to the factory owner. The factory reaches green energy status without a single dollar of upfront investment.
A typical 10 MW rooftop solar installation on an industrial facility in Turkey can generate approximately 15,000 MWh per year, save 7,500 tonnes of CO₂ annually, and reduce electricity costs by USD 450,000–600,000 per year at current market prices. Under an ESCO arrangement, those savings begin from day one.
By the Numbers: CBAM’s Cost vs Renewable Investment
| Scenario | Annual Cost/Saving (USD) | Notes |
|---|---|---|
| CBAM certificates (no action) | +3M–15M | Depends on export volume and carbon intensity |
| Corporate PPA (off-site, 20 MW) | −1.2M–2M electricity saving | Fixed price below grid tariff |
| On-site GES 10 MW (ESCO model) | −500K–700K (zero CAPEX) | Saving from day 1 |
| YEK-G certificates only | −200K–400K carbon cost reduction | Lower cost, lower impact |
The message is clear: the cost of inaction exceeds the cost of renewable investment in virtually every scenario.
Turkey’s Path to 64.7% Renewable Electricity by 2035
Turkey’s National Energy Plan targets 64.7% renewable electricity share by 2035, up from approximately 55% today. The government has committed to at least 2 GW of new YEKA tenders annually and is actively courting foreign investment through regulatory reform, USD-denominated contracts, and streamlined permitting.
For European companies seeking CBAM-compliant supply chains, Turkey’s renewable energy trajectory aligns closely with their own decarbonisation timelines. The window for early-mover advantage — in terms of land access, grid connection slots, and PPA pricing — is open now. It will not remain open indefinitely.
FAQ
Does a YEK-G certificate fully satisfy CBAM requirements for Scope 2 electricity?
A: YEK-G certificates document the renewable origin of electricity consumed in Turkey. CBAM verification bodies increasingly accept these for Scope 2 accounting. However, companies should seek legal confirmation for their specific export product and CBAM sector.
Can a foreign company own a solar or wind project in Turkey directly?
A: Yes. Foreign entities can hold majority stakes in Turkish energy project companies. A Turkish legal entity (typically a Joint Stock Company or Limited Liability Company) must be established. Intercon advises on the optimal corporate structure and local partnership.
What is the typical timeline from CBAM liability recognition to a commissioned PPA in Turkey?
A: A corporate PPA can be contracted within 3–6 months. An on-site GES project from permitting to commissioning typically takes 12–18 months under the new Super Permit regime.
Is the ESCO model available for foreign-owned factories in Turkey?
A: Yes. Intercon structures ESCO/EPS agreements for foreign-owned manufacturing facilities. The key requirement is a long-term energy consumption commitment (minimum 5 years remaining lease or ownership).
What happens to CBAM costs if Turkey introduces its own carbon market?
A: Turkey is developing a national emissions trading scheme. If Turkey’s ETS price aligns with the EU ETS, CBAM costs for Turkish exporters may be offset or eliminated. This is a regulatory development worth monitoring — Intercon tracks these changes closely.
Work With Intercon
Intercon Enerji helps European companies navigate Turkey’s renewable energy market with confidence. From CBAM impact assessment to corporate PPA structuring, ESCO financing, and YEK-G certification — our teams in London (16 Upper Woburn Place, WC1H 0AF) and Istanbul (Ataşehir) provide end-to-end advisory.
Whether you are an energy-intensive exporter, a multinational with Turkish manufacturing assets, or a European investment fund seeking CBAM-aligned project opportunities, we can build the right structure for your objectives.
Contact Intercon → External references: Invest in Türkiye – Energy | EPDK | Ember – Turkey | IEA Turkey
Our Related Services
- Investment Projects Research
- Solar Power Plant
- Wind Power Plant
- Energy Performance Contract
- Our Reference Projects
Ready to invest in Turkey’s renewable energy sector? Explore Intercon’s services or contact our London or Istanbul team. We guide investors from initial assessment to financial close.
