CARBON MARKET AND CARBON TAX

In the 2021 issue of the Carbon Pricing Status and Trends Report published annually by the World Bank, it is stated that there are 64 carbon pricing mechanisms implemented globally to reduce carbon emissions. These mechanisms consist of practices where participation is mandatory (such as ETS, carbon tax) and practices where participation is not mandatory (such as voluntary carbon market). Türkiye is currently implementing a voluntary carbon market. However, with the signing of the Paris Climate Agreement, Turkey promises to reduce CO2 emissions by 15-17% by 2030 and become carbon neutral by 2053.

So what needs to be done to avoid being affected by carbon taxes?
 
    Making sustainable investments to reduce carbon emissions or carbon footprint and documenting these investments with carbon reduction certificates.
 
    Purchasing carbon credits (VER: Verified Emission Reduction) to offset carbon. At this point, carbon credit (VER) holders will be able to sell their carbon credits to other companies.
 
What is the Carbon Market?

The carbon market is a trading mechanism created to encourage the reduction of greenhouse gas emissions. This mechanism began with the Kyoto Protocol, an international agreement to reduce greenhouse gas emissions. The carbon market adopts a regulatory approach to achieve the goal of limiting greenhouse gas emissions and operates through trading of greenhouse gas emissions. Accordingly, a target is set to reduce greenhouse gas emissions and a quota system is implemented to achieve this target. Companies that do not meet emissions reduction targets can offset their emissions by purchasing emission credits. These credits are provided by companies that invest in reducing emissions. The carbon market provides economic incentives to reduce greenhouse gas emissions and encourages investments in emissions reduction.

What is a Carbon Tax?

A carbon tax is an economic tool used to reduce greenhouse gas emissions and combat climate change. This tax means that carbon dioxide (CO2) and other greenhouse gas emissions produced due to the use of fossil fuel resources are subject to a tax.

A carbon tax serves three primary purposes for reducing emissions. First, a carbon tax provides an economic incentive to reduce greenhouse gas emissions by reducing the use of fossil fuel resources. Second, a carbon tax encourages the use of renewable energy sources instead of fossil fuel sources. Finally, the carbon tax provides governments with the financing of policies to combat climate change by providing the necessary financing to reduce emissions.