1) Why carbon pricing has become a legal risk—not a sustainability slogan
Carbon has turned into a regulated cost. For heavy industry, power generation, and carbon-intensive supply chains, carbon pricing is no longer limited to voluntary commitments. It is increasingly shaped by public-law obligations, market-based compliance tools, and cross-border trade measures.
Two developments make Turkey’s carbon pricing agenda particularly urgent:
- Turkey’s Climate Law No. 7552 (published in the Official Gazette on 9 July 2025) builds a statutory framework for carbon pricing instruments, including a national Emissions Trading System (ETS) and related market institutions.
- The EU Carbon Border Adjustment Mechanism (CBAM) entered its definitive regime on 1 January 2026, meaning carbon reporting is paired with financial compliance for covered imports into the EU. (Taxation and Customs Union)
For Turkish producers selling into the EU, CBAM effectively turns “embedded emissions” into a trade variable. Turkey’s Climate Law explicitly defines embedded emissions and sets the stage for market mechanisms that can internalize carbon costs domestically. (LEXPERA)
This article explains Turkey’s legal infrastructure for emissions trading and carbon markets in a way that is usable for (i) compliance planning, (ii) contract drafting, (iii) dispute strategy, and (iv) investment due diligence.
2) Carbon instruments in Turkey: ETS, carbon credits, and potential border measures
Turkey’s Climate Law establishes the policy space for multiple carbon pricing tools, not only ETS. It defines ETS as a cap-and-trade style mechanism built around an upper limit and trading of allowances (“tahsisatlar”), and it also recognizes carbon-based taxes and similar instruments as carbon pricing tools. (LEXPERA)
The Law also defines “offsetting” (denkleştirme), carbon credits, and voluntary carbon markets, and it contemplates a national carbon crediting and offsetting system whose principles will be determined by the Climate Change Presidency. (LEXPERA)
Practically, this creates three parallel compliance realities for companies:
- Mandatory measurement and reporting (MRV) for covered installations;
- Allowance compliance once ETS is operational for the relevant sector;
- Commercial pressure from customers, lenders, and trade partners to provide emissions data and warranties—especially for EU-linked supply chains.
3) The statutory backbone: Climate Law No. 7552 and how it builds an ETS
3.1 ETS will be established by the Climate Change Presidency (Başkanlık)
Under the Climate Law, the Climate Change Presidency is tasked with establishing ETS and managing allowance planning and distribution.
The Ministry’s public communication on the Climate Law also highlights that ETS will be established by the Presidency and allowances will be distributed within that framework. (Çevre ve Şehircilik Bakanlığı)
3.2 Emissions permit requirement (sera gazı emisyon izni)
A critical compliance shift is the concept of an emissions permit: for activities that cause direct greenhouse gas emissions (to be specified by secondary legislation), operators must obtain an emissions permit from the Presidency in order to carry out those activities.
The Law also enables updating or cancellation of the emissions permit during its validity if there are changes in the installation, operation, or in the permit holder’s legal identity/status.
3.3 Annual allowance surrender obligation (tahsisat teslimi)
For ETS-covered operators, the Law requires annual surrender of allowances corresponding to verified annual emissions. It also contains a “catch-up” mechanism for noncompliance, linking failure to surrender to obligations in subsequent periods and administrative consequences.
3.4 National Allocation Plan and free allocation
The Law introduces the concept of a National Allocation Plan (ulusal tahsisat planı) and allows free allocation to be provided (for example, based on historical emissions or benchmarking), and it states that national allocation plans will be published in the Official Gazette.
This is strategically important for energy-intensive trade-exposed sectors: free allocation rules often decide whether ETS is a manageable compliance cost or a severe margin shock.
3.5 Carbon Market Board and institutional governance
The Law establishes a governance layer involving a Carbon Market Board (Karbon Piyasası Kurulu) with representation from multiple ministries and institutions, and it describes roles for the Presidency, the market operator, a central clearing/settlement institution, and market oversight functions, including coordination with the Energy Market Regulatory Authority (EMRA/EPDK).
Why investors care: institutional design affects market liquidity, surveillance, enforcement predictability, and the bankability of carbon-linked revenues.
3.6 Offsetting and voluntary carbon markets—allowed, but regulated
The Law allows the possibility of meeting a portion of ETS allowance obligations through offsetting using carbon credits (subject to conditions and limits), and it requires the Presidency to set the principles for a national carbon crediting/offsetting system. It also makes clear that fraudulent or erroneous offset project documentation can invalidate offset usage and trigger ETS-linked sanctions.
Takeaway: voluntary carbon projects are not “outside the legal system.” Once linked to compliance (offsetting), documentation integrity becomes enforcement-grade.
4) The MRV foundation already exists: Monitoring, Reporting and Verification in Turkey
Before ETS can function, the country needs measurement discipline. Turkey’s MRV infrastructure is anchored in the 2014 Regulation on the Tracking of Greenhouse Gas Emissions (“Sera Gazı Emisyonlarının Takibi Hakkında Yönetmelik”).
4.1 Who is covered?
The MRV Regulation applies to activities listed in Annex-1, which includes large combustion installations (based on thermal input thresholds), refineries, coke production, metal processing, cement clinker, lime, glass, iron/steel, aluminum, pulp and paper, and various chemical processes (examples appear across the Annex).
4.2 Core MRV duties: monitoring plan, annual report, verification
The MRV system requires operators to prepare an emissions monitoring plan and monitor emissions in line with that plan, and it sets annual reporting and verification logic.
From a risk perspective, MRV is the evidence engine of ETS. Once allowances have monetary value, MRV errors transform into financial liabilities and enforcement exposure.
4.3 Verification standards and verifier access
Annex-4 of the MRV Regulation sets verification principles, including access rights for verifiers and expectations around data consistency and completeness.
Practical point: treat verifier engagement like an annual audit cycle—late verification and documentation gaps often cost more than the verifier’s fee.
5) Secondary legislation: Turkey’s ETS draft regulation and the direction of travel
After the Climate Law, secondary legislation becomes the real “operating system.”
A draft titled “Turkey Emissions Trading System Regulation” (Türkiye Emisyon Ticaret Sistemi Yönetmeliği Taslağı) states its purpose as regulating MRV and ETS implementation procedures and principles.
The draft’s rationale explains that ETS requires secondary legislation covering scope, periods, allocation method, and compliance mechanism, and it emphasizes integrating MRV and ETS provisions in a single framework, drawing on the EU ETS experience.
The draft also outlines an emissions permit application process, including a fee/payment structure and evaluation timeline concepts—signaling that the emissions permit will not be a symbolic document but a regulated authorization with administrative process discipline. (static.ebso.org.tr)
6) Timeline: pilot period and expected operational phases
Public reporting indicates that Turkey is moving toward ETS through a pilot implementation and then a first full application period. A January 2026 report states that pilot applications will start in 2026, continue in 2027, and if pilots proceed as planned, the first ETS application period is targeted to begin in 2028. (Anadolu Ajansı)
Separately, Turkey’s Climate Law contains transitional timing logic for ETS-covered operators in relation to emissions permits.
Client-advisory takeaway: even in the pilot phase, companies should behave as if compliance will become financial—because pilot data often becomes the baseline for allocation, benchmarks, and future enforcement culture.
7) Enforcement and sanctions: where ETS becomes “real money”
The Climate Law includes an administrative sanctions section with fines for MRV-related failures and ETS noncompliance, and it also contains consequences affecting emissions permits and market participation.
Examples of enforcement levers include:
- Administrative fines for failure to submit verified emissions reports in time, with harsher treatment for ETS-covered installations.
- Consequences linked to emissions permits and continued operation without a valid emissions permit.
- Penalties tied to failure to surrender required allowances, indexed to market prices (linking legal noncompliance directly to allowance market value).
- Repeated noncompliance affecting permit status (including cancellation and temporary inability to obtain a new permit under conditions described in the Law).
Administrative litigation: challenge is possible, but collection may continue
The Law also provides that administrative sanctions can be challenged in administrative courts, and it clarifies that filing suit does not automatically stop collection.
That means compliance strategy must include early prevention, not only “we will litigate later.”
8) How CBAM reshapes Turkish ETS strategy (and why exporters need legal support now)
The EU Commission states that CBAM’s definitive period starts on 1 January 2026, requiring importers to move beyond reporting into an operational compliance framework. (Taxation and Customs Union)
For Turkish manufacturers exporting CBAM-covered products to the EU, practical impacts include:
- Contractual pressure from EU buyers to provide embedded emissions data, verified methodologies, and audit rights;
- Pricing disputes about who bears CBAM-related costs (supplier vs buyer);
- Supply chain documentation risk (inaccurate data can trigger commercial claims and loss of business, even before public sanctions).
Turkey’s Climate Law defines embedded emissions and builds a governance structure that can support domestic carbon pricing alignment over time. (LEXPERA)
9) Compliance roadmap for Turkish companies: what “good” looks like
A defensible ETS/MRV program is a legal-technical system. Here is a practical roadmap used in mature jurisdictions (adapted to Turkey’s framework):
Step 1 — Determine scope and risk ranking
- Identify whether your installation falls within MRV Annex-1 categories and thresholds.
- Map future ETS likelihood by sector and emissions profile (pilot participation risk).
Step 2 — Build an MRV governance model
- Assign internal responsibility (legal + environment + finance).
- Implement data controls (metering, fuel input records, production records).
- Prepare for verifier access and evidence requests as an annual cycle.
Step 3 — Prepare for the emissions permit regime
The Climate Law makes emissions permits a condition to conduct ETS-defined direct emission activities.
Companies should pre-compile permit-ready documentation and maintain corporate and facility change logs to avoid permit update/cancellation risk.
Step 4 — Allowance strategy (when ETS starts to bite)
- Build a policy for procurement vs abatement.
- Develop internal approval rules for trading, hedging, and budget allocation.
- Treat allowance surrender like a statutory year-end obligation, not an optional purchase decision.
Step 5 — Incident response and dispute readiness
When enforcement happens, outcomes often depend on evidence quality. Keep:
- verifier correspondence,
- version history of monitoring plans,
- board/management approvals on emissions data,
- audit trails for key assumptions.
10) Contracting and transactions: where clients usually lose money
10.1 Carbon clauses in supply and offtake contracts
If you sell goods to the EU (or to EU-exposed buyers), consider clauses covering:
- embedded emissions data delivery obligations,
- verification standards and audit rights,
- allocation of CBAM/ETS-related costs,
- change-in-law and renegotiation mechanics,
- indemnities for misreported emissions data.
10.2 M&A due diligence: carbon liabilities are becoming deal issues
For acquisitions in energy-intensive sectors, due diligence should include:
- MRV compliance history (late reports, verifier findings),
- emissions permit status (once applicable),
- exposure to administrative fines and enforcement pathways,
- readiness for ETS pilot / benchmarks affecting future allocation.
10.3 Financing and covenants
Lenders may require:
- compliance representations and warranties,
- event-of-default triggers for major carbon noncompliance,
- reserve accounts for carbon cost volatility (especially if allowances become material).
11) Where legal counsel adds concrete value
Companies typically seek counsel in four moments:
- Before the first verifier cycle (to build a defensible MRV file);
- When contracting with EU buyers (CBAM and embedded emissions clauses);
- During enforcement (administrative investigations, sanctions, and litigation strategy);
- During investment events (M&A, joint ventures, project finance—where carbon liabilities can change valuation).
Conclusion: Turkey’s ETS is becoming a compliance market—with real sanctions and real contracts
Turkey’s Climate Law No. 7552 establishes a national ETS architecture, introduces an emissions permit concept for ETS-defined direct emission activities, creates governance bodies for carbon markets, and links enforcement to administrative sanctions and judicial review routes.
Meanwhile, the MRV framework has been in place since 2014 and already covers major industrial categories and combustion thresholds—meaning the data pipeline for ETS is not theoretical.
Finally, with CBAM’s definitive regime starting in 2026, exporters will face a sharper carbon data and cost environment whether or not they are ETS-covered on day one. (Taxation and Customs Union)
The best strategy is not to wait for the final ETS rulebook. It is to build MRV excellence now, draft carbon-smart contracts, and treat emissions data as a financial statement-level risk.
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