Türkiye establishes legal framework for national carbon market

The Turkish Emissions Trading System (TR ETS) Regulation, which shapes the legal framework of Türkiye's national carbon market, was published in the Official Gazette dated 27 August 2026 and entered into force. Prepared by the Ministry of Environment, Urbanisation and Climate Change, the regulation sets out the procedures and principles for monitoring and reporting emissions and trading allowances.

With the regulation, Türkiye has transitioned from voluntary markets to a mandatory and statutory carbon market, establishing its first comprehensive market structure aligned with the European Union Emissions Trading System (EU ETS). Energy Markets Operations Inc. (EPİAŞ) has been authorised to operate the system and conduct financial transactions.

Free allowances in the pilot period

According to the schedule set by the Climate Change Presidency, 2026 and 2027 are considered the pilot period. In this period, 100 percent of allowances are set to be distributed free of charge. The facility-based distribution schedule for free allowances in the pilot period has not yet been finalised.

Category B and C facilities with annual emissions above 50,000 tonnes of CO2 equivalent are included in the system. Public facilities such as schools and hospitals, and the defence industry, are exempt.

Penalties up to TRY 50 million

For enterprises operating under the ETS, administrative fines may range from TRY 1 million to TRY 50 million in cases of failure to submit a verified emissions report or to fulfil allowance obligations. These sanctions are based on the regulation adopted by the Grand National Assembly of Türkiye in 2025.

A national mechanism against CBAM

This regulation establishes the national mechanism that will allow the carbon tax to be paid by Turkish industry under the European Union's Carbon Border Adjustment Mechanism (CBAM) to remain within Türkiye. It constitutes the most concrete economic instrument on Türkiye's path towards its 2053 net zero emissions target.

Türkiye has been operating a monitoring, reporting and verification (MRV) system for its emissions since 2014. With the new regulation, this infrastructure is transformed into a mandatory market mechanism.

A preparation window for industry

The free allowance practice in the pilot period acts as a preparation window for Turkish industry. After 2028, allowances are expected to become charged and carbon prices are expected to rise. Therefore, enterprises need to complete their technological transformation investments in this period.

The details of carbon futures contracts to be traded on the secondary market to be operated by EPİAŞ will be determined by market operating procedures. With the publication of these procedures, a clearer picture of the market's functioning will emerge.