The European Union’s (“EU”) policies under the “European Green Deal” have had a profound impact on international trade law in addition to the environment. For a climate-neutral Europe by 2050, this strategic framework imposes new legal and financial obligations on international companies.
Under the Green Deal strategy, the EU Carbon Border Adjustment Mechanism (“CBAM”) is transforming the conditions of access to the EU market for exporters operating in carbon-intensive sectors, such as cement, iron and steel, aluminum, fertilizer, hydrogen and electricity. The mechanism envisages a certificate-based pricing system for embodied carbon emissions generated in such sectors during the production of goods imported into the EU. Accordingly, as of 2026, importers will be obligated to buy CBAM certificates corresponding to the carbon content of their products.
CBAM not only affects public law and environmental policy but also has far-reaching implications for private law relations, international trade and investment law. For instance:
- Exporters and importers may face difficulties in performance, adjustment claims, contract termination or liability disputes if they do not lay down their carbon-related financial obligations clearly in international sales contracts.
- On the other hand, it may be claimed that the obligations imposed under carbon regulations undermine foreign investors’ expectations of legal security. In terms of the fundamental principles of international investment law, such as fair and equitable treatment, full protection and security, and the prohibition of indirect expropriation, regulations such as CBAM may be invoked in investor-state disputes.
- In the context of carbon-related obligations, there is also a significant legal debate regarding how to balance legitimate public policies for environmental protection and the contractual and vested rights of the investor. Although many Bilateral Investment Treaties (“BITs”) provide for environmental protection measures as an exception, it is clear that such measures may lead to international arbitration if applied in an arbitrary, discriminatory or disproportionate manner.
In Türkiye, exporters face an asymmetric cost structure since the country has not yet adopted a carbon pricing mechanism in line with the EU. This situation undermines both legal predictability and contractual security. During the integration of compliance obligations into Turkish trade and tax legislation, the lack of clarity on administrative sanctions and environmental reporting obligations may lead to uncertainty in terms of liabilities as well as hesitation in transactions. In the face of this multi-layered risk structure, companies have no choice but to develop legal compliance strategies. First, they need to revise their contracts in terms of carbon costs, border adjustment risks and environmental regulations. Thus, carbon and environmental compliance clauses that clearly delineate parties’ liabilities should become key components of future contracts. Secondly, in the context of environmental sustainability, companies should undergo a legal review of ESG criteria during mergers, acquisitions, or direct investments. In these processes, carbon footprint, emission monitoring systems and environmental public obligations need to be reviewed. Thirdly, the dispute management protocols to be established for disputes arising from environmental regulations should be restructured in terms of the applicable law and the competent arbitration center.
In conclusion, the European Green Deal is not only an environmental policy but also a normative paradigm shift that entails a structural transformation of international trade. With regulations such as CBAM, we are witnessing a new era in which international trade law is being redefined not only in terms of customs duties, rules of origin and technical standards but also in terms of carbon regulations and environmental obligations. Since companies failing to adapt to this new era could face both financial and legal sanctions, this transformation constitutes an area of reform for the sustainability of international trade along with environmental law.
Dila Yıldırım, Associate
