On 27 August 2026, Türkiye published secondary regulations for its national emissions trading system (TR-ETS) in the Official Gazette (in Turkish). The regulation implements the mandate established under the landmark Climate Law adopted in July 2025, outlining the operational framework for the system’s governance, allocation rules, registry, and market stability mechanisms.
The adoption of the regulation marks a major step in the development of the TR-ETS as Türkiye prepares to price emissions from power and industry emitters in support of its 2053 net-zero target and to address the impacts of the EU Carbon Border Adjustment Mechanism (CBAM). Internationally, the development comes as Türkiye prepares to host COP31 and joins the Open Coalition on Compliance Carbon Markets, reinforcing its engagement in carbon market cooperation alongside jurisdictions such as the EU, Brazil, and China.
Coverage largely mirrors the EU ETS
The regulation defines the scope of the TR-ETS to cover Category B (50,000-500,000 tCO2e) and Category C (>500,000 tCO2e) installations across power and energy-intensive industrial sectors, while Category A facilities (<50,000 tCO2e) remain subject only to MRV obligations. The sectoral scope and GHG coverage closely mirror the EU ETS, building on Türkiye's existing MRV system, under which accredited verifiers assess and validate installations' emission reports before submission to the Directorate of Climate Change (DoCC). Covered entities must obtain GHG permits from the DoCC, an operating authorization distinct from the allowances traded under the cap, which are valid for five years and require a renewal application at least six months prior to expiration.
An intensity-based cap, set ex post
The regulation establishes an intensity-based cap-setting framework, where the system-wide cap will be calculated ex post based on verified activity levels and benchmarks rather than being fixed in advance. Regulated entities must submit their verified annual GHG emissions and activity level reports to the DoCC by 30 April each year. The overall annual cap for allowances will subsequently be announced in the National Allocation Plan, published in the Official Gazette within 60 days of the reporting deadline, ahead of a pilot phase preceding the system's first full implementation period.
Free allocation, auctions, and a complementary price tool
Allowances under the cap will be distributed for free and through primary market auctions conducted by Energy Exchange Istanbul (EXIST). Free allocation will be calculated at the sub-installation level using benchmarks multiplied by the sub-installation's activity level, a sectoral activity factor, and a free-allocation rate. Covered entities must submit their free allocation applications within 30 days of the publication of the National Allocation Plan. When the free-allocation rate is set below 100%, the remaining allowances under the cap will be directed toward primary market auctions and the market stability reserve.
The regulation also introduces a new complementary carbon price mechanism, under which entities may voluntarily pay an additional amount on top of the price of allowances purchased at primary auction, a tool that could prove useful for exporters seeking to demonstrate a higher effective carbon cost paid at home.
Revenues are earmarked for climate action and just transition
As with other revenues generated under the ETS, proceeds from the complementary carbon price mechanism are channeled into the DoCC's budget as special revenue, a use of funds already established under the Climate Law. Under that law, up to 10% of these revenues may be allocated to just transition measures supporting vulnerable groups and sectors affected by the shift away from carbon-intensive industries.
Flexibility and market stability measure specifics
The regulation allows entities to use flexibility mechanisms across compliance cycles, including banking surplus allowances within an implementation period and borrowing allowances from future years within that same period. Regulated facilities may also surrender domestic carbon offset credits to fulfill a share of their annual compliance obligations. Entities that fail to meet surrender obligations remain subject to the fines and permit revocation risk set out in the Climate Law.
A market stability reserve will be seeded with a share of the allowances otherwise destined for primary auctions, with the DoCC authorized to activate the reserve based on its assessment of the volume of allowances in circulation and prevailing prices. The regulation does not specify thresholds for triggering releases or withdrawals, leaving the reserve's calibration to future implementing rules.
Facilities facing allowance deficits may separately request access to an additional reserve, capped at 10% of the ETS cap announced in the National Allocation Plan, provided they have already surrendered at least 70% of their obligation for the relevant facility. These allowances are issued directly into the registry for release into the primary market and priced at a premium, set at least 50% above the higher of the recent primary or secondary market average price.
Carbon Market Board has a critical role regarding next steps
Many of the operational details needed to launch the TR-ETS remain to be defined by the Carbon Market Board, a high-level body chaired by the environment minister and comprising senior officials from across Türkiye's economic and energy institutions, together with the heads of the DoCC and country's securities and energy regulators. The Board holds sweeping powers over the system's design, including deciding free allocation rates, offset limits, price corridors, and the scope and duration of the pilot and implementation phases, while Energy Market Regulatory Authority (EMRA) is separately tasked with setting the detailed rules governing auctions and registry operations.
The Board's decisions must come first, clearing the way for EMRA's rules and, ultimately, allowance trading. The first National Allocation Plan determining the system's cap and allocation figures, is due within 60 days of the 30 April annual reporting deadline. These steps will unfold as Türkiye deepens its role in international carbon market cooperation, including through the Open Coalition on Compliance Carbon Markets and its upcoming presidency of COP31.
