New Developments
The Turkish Emissions Trading System Regulation (the “Regulation”), published in the Official Gazette dated 27 August 2026 and numbered 33353, sets out the operating rules of the Turkish Emissions Trading System (the “ETS”). The Regulation implements the Climate Law No. 7552 dated 2 July 2025 (the “Climate Law”) and Article 792/D of Presidential Decree No. 4, and entered into force on its publication date.
The Regulation repeals the Regulation on the Monitoring of Greenhouse Gas Emissions published in the Official Gazette dated 17 May 2014 and numbered 29003 (the “Repealed Regulation”), and provides that references to the Repealed Regulation are deemed to be references to the new Regulation. This marks the transition from a regime that for twelve years consisted solely of monitoring, reporting and verification (“MRV”) duties to a full emissions trading system with an allowance surrender obligation and an organised carbon market.
The Directorate of Climate Change (the “Directorate”) acts as the regulator and supervisory authority, while Enerji Piyasaları İşletme Anonim Şirketi, the Turkish energy exchange (EPİAŞ), is designated as the Market Operator. The core decisions on allowance pricing and free allocation rest with the Carbon Market Board, chaired by the Minister of Environment, Urbanisation and Climate Change.
Scope and Installation Categories
Annex 1 to the Regulation lists twenty five activity categories. These include the combustion of fuels in installations with a total rated thermal input of 20 MW or more, oil refining, coke production, iron and steel production, aluminium and non-ferrous metal production, clinker and lime production, glass and ceramic production, pulp and paper production, and the manufacture of chemicals such as ammonia, nitric acid, hydrogen and soda ash.
Installations are classified into three categories by reference to their annual emissions, calculated conservatively on the basis of installed capacity, excluding carbon dioxide from biomass and including transferred carbon dioxide:
| Category | Annual emissions (tonnes CO2e) | MRV duties | Within ETS |
|---|---|---|---|
| Category A | 50,000 or below | Yes | No |
| Category B | Above 50,000, up to 500,000 | Yes | Yes |
| Category C | Above 500,000 | Yes | Yes |
This classification is the threshold that determines the level of an operator’s obligations. Category A installations must monitor, report and have their emissions verified, but they carry no allowance surrender obligation. Surrender duties arise only for Category B and Category C installations.
Installations and parts of installations used for research and development, installations using exclusively biomass, and military assets fall outside the Regulation altogether. Installations belonging to schools, universities, hospitals and defence industry entities are excluded from the ETS in respect of the activities they carry out, but their MRV duties continue to apply. Natural gas and crude oil transmission and storage activities are likewise excluded from the ETS, other than for MRV purposes, until the end of the first implementation period.
An operator carrying out any activity listed in Annex 1 brings the other Annex 1 activities within scope irrespective of capacity. Installations that fall outside the ETS due to a change of category remain within the system for the system year in which the change occurs.
Changes to the Annex 1 Activity List
The new Annex 1 largely preserves the activity list of the Repealed Regulation but revises certain thresholds and definitions in ways that may capture installations previously outside the regime:
| Activity | Repealed Regulation | New Regulation |
|---|---|---|
| Hydrogen and synthesis gas production | 25 tonnes per day or more, by reforming or partial oxidation only | 5 tonnes per day or more, no process limitation |
| Oil refining | No threshold specified | Using combustion units with a total rated thermal input of 20 MW or more |
| Primary aluminium production | Primary aluminium production | Primary aluminium or alumina production |
| Iron and steel | Production of pig iron and steel | Production and casting of iron, malleable iron and/or steel |
| Carve-out from the combustion activity | Incineration of hazardous or household waste | Incineration of hazardous or municipal waste |
The reduction of the hydrogen threshold is particularly significant. Lowering the daily production capacity threshold from 25 tonnes to 5 tonnes, combined with the removal of the process limitation, may bring mid-sized hydrogen producers within scope for the first time.
Greenhouse Gas Emission Permit
Operators within the ETS must obtain a greenhouse gas emission permit from the Directorate in order to carry out activities generating greenhouse gas emissions. An operator running more than one installation must obtain a separate permit for each installation, although a single permit suffices where several installations are located at the same address.
Applications are made electronically on the basis of the information and documents listed in Annex 3 and are assessed within a maximum of 60 days. Missing or incorrect items are notified to the applicant within 10 business days of the application date and must be remedied within 3 months of that notification. Where an application is rejected, the application fee is not refunded.
The staffing requirement in Annex 3 will call for separate planning in practice. Category C installations must have at least two employees who are graduates of an engineering or science faculty and have at least two years of experience in greenhouse gas monitoring and reporting. Category B installations must have at least one such employee with at least one year of experience. Operators without in-house personnel meeting these criteria may appoint external individuals or entities that satisfy the same requirements.
A permit is valid for five years from the date of issue. Operators must apply for renewal at least six months before expiry. Changes requiring an update to the permit, and changes in the identity of the permit holder, must be notified to the Directorate within 30 days.
A permit is revoked where wilfully false, misleading or untrue information, documents or statements are found to have been submitted, where the installation ceases operations, even if it previously operated, or where it is technically impossible for the installation to resume operations, or where the surrender obligation is breached within the meaning of Article 14(4)(ç) of the Climate Law.
Allowances and Free Allocation
The ETS cap is set on an emissions intensity basis and is announced through the National Allocation Plan, published in the Official Gazette within 60 days following the deadline for submitting verified greenhouse gas emission reports for the relevant system year. Allowances under the cap are issued in the Transaction Registry System and are then either auctioned on the primary market or allocated free of charge.
Free allocation is based on benchmarking at sub-installation level. The free allowance entitlement of an installation equals, for each sub-installation, the product of the benchmark value, the free allocation rate, the sectoral activity coefficient and the activity level. Benchmark values are announced by the Directorate to four decimal places, by the last business day of November in the calendar year preceding the system year in which the implementation period begins. Fractional results are rounded up to the next whole number.
Applications for free allowances are made per installation within 30 days of publication of the National Allocation Plan and are reviewed by the Directorate within 15 business days. Where corrections are requested, the operator must complete them within 10 business days. Operators applying late pay the application fee with a 50% uplift, and operators filing their verified reports after the submission deadline pay it with a 100% uplift.
Allowances must be surrendered through the Transaction Registry System, in an amount matching the verified greenhouse gas emission report, by the last business day of November of the compliance year. Cessation of operations, liquidation or a composition with creditors does not discharge the surrender obligation.
An additional reserve mechanism is available to installations facing an allowance shortfall. The reserve may be used only where the emissions intensity of the relevant sub-installations has not increased, and its use on the primary market is capped at 10% of the ETS cap announced in the National Allocation Plan. Where an installation has received free allowances exceeding 70% of its verified emissions, it must first have surrendered allowances equal to its free allocation. Where free allowances amount to less than 70% of verified emissions, the installation must have met at least 70% of its obligation and hold no remaining allowances in its account. The minimum price under the additional reserve is 50% above the higher of the primary market and secondary market weighted average allowance prices for the last three months, calculated as at the last business day of November. Installations using the reserve must complete their surrender by the last business day of December.
Market Structure and Flexibility Mechanisms
Allowances are offered on the primary market in accordance with an auction calendar set by the Directorate and published on the Market Operator’s website within 15 business days following publication of the National Allocation Plan. If an auction is cancelled, the relevant volume is distributed evenly across the remaining auctions of the system year. If the final auction is cancelled, it is repeated within 15 business days and may be repeated no more than twice. Should the auction fail again, the volume is auctioned in the following calendar year.
On the secondary markets, allowances trade on a continuous trading basis. A market stability reserve has been established to support price stability, and operators may carry allowances forward into later years of the same implementation period (banking) and use allowances of later years for the current compliance year (borrowing).
At the request of operators, a complementary allowance price mechanism may be applied on the primary market. The auctions at which this mechanism operates are determined by the Directorate at least 7 business days in advance. The Carbon Market Board is empowered to set minimum and maximum allowance price ranges for the ETS market, although those ranges do not apply to the additional reserve or to the complementary allowance price mechanism.
For offsetting purposes, only carbon credits generated by projects carried out within the territory of the Republic of Turkiye may be used, up to a proportion determined by the Carbon Market Board. The Regulation also allows agreements providing for the mutual recognition of allowances between the Turkish ETS and other emissions trading systems, together with electronic linking between such systems.
Changes to the MRV Regime
The central MRV timetable is unchanged. Operators must report to the Directorate, by 30 April each year, the greenhouse gas emissions and activity levels monitored between 1 January and 31 December of the preceding year. The monitoring plan must be submitted for approval at least six months before monitoring first begins. The procedural provisions, however, have been tightened against operators, and verification bodies are now assigned through the Central Electronic Verification Body Assignment System (“MEDAS”). The changes are set out below:
| Item | Repealed Regulation | New Regulation |
|---|---|---|
| Time to remedy monitoring plan deficiencies | 60 additional days | 30 additional days |
| Notification of changes to information and documents | Within 60 days | Within 30 days |
| Selection of the verification body | Free choice of the operator | Assignment through MEDAS |
| Verifier accreditation standard | TS EN ISO 14065 | ISO/IEC 17029 |
| Record retention | Not regulated | At least 10 years |
| Sanctions regime | Environmental Law No. 2872 | Climate Law No. 7552, tiered |
Assignment through MEDAS removes the operator’s ability to select its own verifier. Operators and installations subject to the Public Procurement Law No. 4734 dated 4 January 2002 fall outside MEDAS.
Operators seeking free allocation must additionally prepare a Monitoring Methodology Plan. The minimum content is prescribed in Annex 4 and includes flow diagrams at installation and sub-installation level, emission sources, measurement points, the procedure for recording PRODCOM codes, and the methods used to measure heat and electricity balances. Changes to the plan must be notified to the Directorate within 30 days. The data parameters underlying the verified activity level report are set out separately in Annex 5, under which the NACE and PRODCOM codes of the installation and its sub-installations are reported.
Administrative Sanctions
Article 35 of the Regulation takes the fine band of TRY 500,000 to TRY 5,000,000 set out in Article 14 of the Climate Law, tiers it by installation capacity, and expresses it in revalued amounts applicable for 2026. The fines for failing to submit a verified greenhouse gas emission report within the prescribed period are as follows:
| Installation | Annual emissions (tonnes CO2e) | Administrative fine |
|---|---|---|
| Category A | 50,000 or below | TRY 627,450 |
| Category B | Above 50,000, up to 250,000 | TRY 1,254,900 |
| Category B | Above 250,000, up to 500,000 | TRY 2,509,800 |
| Category C | Above 500,000, up to 2,000,000 | TRY 4,392,150 |
| Category C | Above 2,000,000 | TRY 6,274,500 |
These fines are doubled for operators within the ETS. A single reporting delay may therefore cost a Category C installation up to TRY 12,549,000.
A separate tier applies to operators within the ETS that carry on activities without an emission permit, or continue to operate under an expired or revoked permit. Fines under this tier start at TRY 1,254,900 and reach TRY 12,549,000 for Category C installations with annual emissions exceeding 5,000,000 tonnes of carbon dioxide equivalent.
Operators failing to surrender allowances face, under the Climate Law, an administrative fine equal to twice the higher of the primary market and secondary market weighted average allowance prices for the last three months of the year to which the verified report relates, applied to each allowance not surrendered. The unsurrendered volume is additionally carried over to the make-up year. Operators failing to meet at least 80% of their annual surrender obligation on time for three consecutive years lose their emission permit and cannot obtain a new one for a period of three to six months.
Under the Climate Law, administrative fines are increased by one time on the first repetition and by two times on the second and subsequent repetitions occurring within three years of notification. The fine for any single act may not exceed TRY 50,000,000.
Transitional Provisions and the Pilot Phase
The ETS begins with a pilot phase. Its scope, duration and operating rules will be determined by the Carbon Market Board after consulting the relevant institutions, organisations and non-governmental organisations. Under provisional Article 1 of the Climate Law, administrative fines are reduced by 80% during the pilot phase.
The most immediate obligation concerns the Monitoring Methodology Plan. Operators within the pilot phase must submit their first plans electronically to the Directorate within two months of the Regulation’s entry into force, that is, by 27 October 2026. The Directorate may extend this period by up to six months. Operators that did not submit a plan during the pilot phase must do so by the end of the calendar year preceding the year in which the first implementation period begins.
As regards emission permits, provisional Article 1(2) of the Climate Law requires operators to obtain a permit within three years of the Climate Law’s entry into force on 9 July 2025, that is, by 9 July 2028 at the latest. During that period, operators are deemed, on a one-off basis, to hold a permit so that they may continue their activities. Acting on a decision of the Carbon Market Board, the Directorate may extend this period by up to two years.
The first implementation period will run in two sub-periods, and the annual benchmark values for the first sub-period will be announced in the National Allocation Plan once the verification reports for sub-installations have been submitted.
Conclusion
The Regulation converts carbon pricing in Turkiye into a binding financial obligation for the first time. A substantial part of the parameters that will drive its cost, however, has been left to decisions of the Carbon Market Board and to secondary legislation to be issued by the Directorate. This includes the scope and duration of the pilot phase, free allocation rates, sectoral activity coefficients, benchmark values and the auction calendar. Operators are therefore not yet in a position to quantify the financial impact with precision, although their preparatory obligations have already begun.
Industrial operators should first determine whether they carry out an activity listed in Annex 1 and, based on installed capacity, which installation category they fall into. That determination is the threshold question that decides whether an allowance surrender obligation arises at all. Given the amended thresholds and definitions, particularly for hydrogen and synthesis gas production and for oil refining, installations previously assessed as being outside scope under the Repealed Regulation should be reassessed.
Two dates stand out. Operators within the pilot phase must submit their first Monitoring Methodology Plans to the Directorate by 27 October 2026, and operators falling within the ETS must obtain a greenhouse gas emission permit by 9 July 2028 at the latest. Given the staffing requirement for permit applications and the technical content of the Monitoring Methodology Plan, the preparation window for both obligations is short.
Finally, because verification bodies will be assigned through MEDAS and the accreditation standard moves to ISO/IEC 17029, existing engagements and any framework agreements with verification bodies should be reviewed against the new regime. The obligation to retain records for at least ten years should likewise be reflected in internal archiving and data governance procedures.
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