Türkiye has taken a significant step forward in establishing a framework for its national emissions trading system (TR-ETS). The secondary legislation governing the system was published in the Official Gazette on 27 August 2026, implementing the framework established by Türkiye’s Climate Law, which was adopted in July 2025. The system is designed to reduce emissions from power and energy-intensive industries, support the country’s goal of achieving net zero emissions by 2053, and assist Turkish exporters in managing the increasing costs linked to the European Union’s Carbon Border Adjustment Mechanism (CBAM).
The creation of the TR-ETS is significant because the EU is Türkiye’s largest trading partner. Since the CBAM entered its definitive phase in January 2026, importers of covered products, including steel, aluminum, cement, fertilizers, electricity and hydrogen, must account for the carbon emissions embedded in those goods. However, if a carbon price has already been paid in the producer country, that amount can be deducted from the CBAM liability.
This gives Türkiye a strong incentive to establish its own carbon pricing system. Instead of allowing all carbon-related revenues to be collected at the EU border, the country can collect some of them domestically and use them to support its decarbonization and the green transition. It is important to note that the TR-ETS does not automatically eliminate CBAM costs for Turkish exporters. Instead, it establishes a mechanism that allows an eligible carbon price paid in Türkiye to reduce the ultimate cost in the EU.
How the Turkish ETS will work
The TR-ETS will initially focus on the power generation sector and energy-intensive industries. Facilities will be classified according to their annual emissions.
- Category A: installations producing less than 50,000 tCO₂e per year, and these installations will mainly be subject to monitoring, reporting and verification (MRV) requirements.
- Category B: installations emitting between 50,000 and 500,000 tCO₂e per year
- Category C: installations emitting more than 500,000 tCO₂e per year.
Categories B and C will be subject to the system’s trading and compliance obligations.
Covered facilities will require GHG permits from the Directorate of Climate Change (DoCC) in Türkiye. These permits differ from the emissions allowances traded under the ETS and will be valid for five years, with renewal applications to be submitted at least six months before they expire.
The system will operate through a pilot phase in 2026 and 2027. Then, it will move into its first full implementation period from 2028 to 2035. Each year by 30 April, companies will report their verified emissions and activity levels to the DoCC. The government will then use this information, together with sectoral targets, to determine the annual allowance cap through the National Allocation Plan.
Traditional ETS models establish a fixed emissions cap in advance. Türkiye will use an intensity-based approach. The cap will be calculated once verified production activity and emissions data are available.
Carbon revenues and what’s coming up next
A key aspect of the TR-ETS concerns how the government will use revenues generated by carbon pricing.
Revenues from emissions permits, allowance auctions, market stability operations, authorised international carbon credits, certain administrative fees, and a complementary carbon pricing mechanism will be treated as special revenues and allocated to the DoCC.
These funds are intended to support climate action and Türkiye’s green transition. Under the Climate Law, up to 10% of these revenues can be designated for just-transition measures to support vulnerable groups and sectors affected by the shift away from carbon-intensive activities.
The system also introduces mechanisms designed to prevent excessive volatility in the carbon market. Part of the allowances that could otherwise be auctioned will be held by a market stability reserve, allowing the DoCC to intervene depending on market conditions.
However, there are still a few important details to sort out. The Carbon Market Board, which is chaired by the environment minister and includes senior officials from economic, energy, and regulatory institutions, will determine aspects such as free-allocation rates, offset limits, price corridors, and the precise scope and duration of the pilot phase. In addition, the Energy Market Regulatory Authority will establish detailed rules for auctions and registry operations.
Therefore, Türkiye’s new system represents both a climate policy and a trade strategy. By implementing a domestic carbon price, the country can support its industrial sector's transition to lower carbon emissions while retaining part of the economic value. At the same time, the TR-ETS helps Turkish exporters by giving them a tool to adapt to the EU's CBAM; it also may lower the carbon revenues sent to Europe. The system's effectiveness will depend on the ambition of the targets set, the design of the free allocations and whether it succeeds in reducing both absolute emissions and emissions intensity.
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