New Turkish ETS Draft Sets Phased Rules, Offset Cap, and Industry Obligations

Turkey has published a draft regulation outlining the structure of its upcoming emissions trading system (ETS), setting out a phased implementation that will allow limited use of offsets and introduce new obligations for high-emitting sectors.

An aerial perspective highlighting the contrast between Istanbul's dynamic cityscape and the expanse of Belgrad Forest. AI generated picture. 

The proposal, released by the Ministry of Environment, Urbanisation and Climate Change, is open for public consultation until 4 August. It details how the ETS will operate, including requirements for emissions permits, rules for allowance allocation, and penalties for non-compliance.

The framework follows climate legislation adopted earlier this month, which designates the ETS as a core policy instrument to help Turkey reduce its greenhouse gas emissions. ‘In this context, secondary legislation is needed to define the procedures and principles governing the operation of the Turkish ETS’, the ministry said.

The system will initially apply to Category B and C facilities—those emitting over 50,000 tonnes of CO₂ equivalent per year—while schools, hospitals, and defence facilities are excluded.

A pilot phase will cover emissions from 2026 and 2027, targeting sectors such as electricity generation, cement, aluminium, steel, ammonia, and nitric acid. During this period, companies will receive all allowances free of charge. From 2028 onwards, the system will move into full implementation, running through 2035.

The draft introduces primary and secondary carbon markets and includes measures such as a market stability reserve and post-pilot mechanisms for allowance banking and borrowing. Up to 10% of compliance obligations may be met using Turkish carbon offsets once the pilot phase concludes.

While the proposal has been broadly welcomed, several industry participants have flagged unresolved issues. Mehmet Kemal Demirkol, managing partner at GTE Carbon, said the inclusion of offsets was ‘a welcome step for Turkish developers.’

Others were less optimistic about the pilot’s impact. ‘Facilities will not be taking real action until 2028’, one source said, adding that partial compliance in the second year could have encouraged earlier engagement.

Critics also pointed to the absence of a roadmap for coal. ‘Incorporating coal into the ETS framework is not optional; it is essential for credibility, effectiveness, and long-term decarbonisation’, one source noted.

There are also questions over the types of credits that will be permitted, the lack of price-setting guidance, and whether carbon removals—such as afforestation—will be recognised within the compliance framework.

Ramazan Aslan, managing partner at Life Climate, said businesses should not underestimate the pilot period: ‘It is beneficial… to evaluate the ETS pilot period as a mechanism that will come into force with all its elements… and to prepare accordingly from now on.’