The Impact of European Green Deal on Turkey’s Iron and Steel Industry: Decomposition Analysis of Energy-Related Sectoral Emissions

Abstract

The European Union has put forward a vision under the EU Green Deal’s name to take the lead in itspriorities, fulfill the Agreement’s criteria, and subsequently accept the first EU climate law on March 5,2020. The law framework aims to impose tax obligations on consumption goods imported by the EU fromabroad, especially on energy-intensive sectors, by applying the carbon border adjustment mechanism. Ourmain goal is to determine what kind of measures can be taken to ensure that the iron and steel industry isleast affected by the EU border carbon regulation. We are an absolute exporter, are least affected by theEU carbon border adjustment. For this reason, the change in energy-related greenhouse gas emissionsfrom the iron and steel industry from 1998 to 2018 was analyzed using the Logarithmic Mean DivisiaIndex (LMDI) model to investigate the potential effects of carbon border adjustment in the iron and steelindustry. The analyzes were made with five significant factors that determine the change of emissions.These factors are; changes in economic activity, activity mix, energy intensity, energy mix, and emissionfactors. Analysis has suggested that the economic activity effect has raised CO2 emissions. This methodindicates that the energy intensity’s impact could be the first key determinant of GHG emissions. Turkeyshould attempt to implement low-carbon development policies and reduce energy-related emissions in theiron & steel sector are the least impacted by the EU’s carbon border adjustment.