Türkiye Reaches a New Milestone in Emissions Trading: ETS Draft Regulation Published
- Goldstein Carbon
- Jul 29
- 7 min read
Updated: Jul 30
Following the ratification of the Climate Law in the Official Gazette in July 2025, the first draft regulation for the Emissions Trading System (ETS) has been presented to the public. The draft includes comprehensive provisions regarding the monitoring, reporting, and verification of emissions.
Türkiye continues to develop the legislative framework for controlling greenhouse gas emissions and implementing the Emissions Trading System. After the Climate Law was published in the Official Gazette, the first draft regulation outlining the technical framework and operational details of ETS was shared publicly.
This draft defines the principles and procedures for emission monitoring, reporting, and verification (MRV), while also regulating the management of greenhouse gas emissions from ETS-covered activities. It further details the obligations of verifiers and operators, clearly outlining the authority and responsibilities of all individuals and entities involved in the process.
The draft regulation is considered a major milestone in the process of establishing Türkiye's ETS infrastructure and embraces a participatory approach. Feedback and objections to the draft can be submitted to the relevant authorities by August 4, 2025.
In this blog article, the critical regulatory provisions and headings essential for implementation and compliance are thoroughly examined by Goldstein Carbon.
Contents:
ETS-Covered Activities and Facility Categorization
Facilities are categorized under three main groups based on their prudently estimated annual greenhouse gas emissions according to their installed capacities:
Category A Facility: Equal to or less than 50,000 tons of CO2 (eq) Category B Facility: Between 50,000 and 500,000 tons of CO2 (eq) Category C Facility: More than 500,000 tons of CO2 (eq)
NOTE: In all categories, annual emissions are based on prudently calculated estimates according to installed capacity, excluding CO2 from biomass and including transferred CO2.
The legislation primarily targets Category B and C facilities and directly focuses on carbon-intensive sectors such as energy production, iron-steel, aluminum, cement, chemical manufacturing, and paper industries.
Specific greenhouse gases are defined for each sector and activity type, with related obligations detailed. The greenhouse gas emission permit is issued with a five-year validity and must be renewed accordingly.
ETS Cap and Allocation Mechanism
The cap to be determined under the ETS will be based on an emission intensity-based determination approach. Allowances within this cap will be issued through the Registry and may be offered for sale in the primary market or distributed free of charge. Companies must deliver allowances corresponding to their verified emissions based on verified greenhouse gas emission reports through the Registry by the last business day of November each compliance year.
The allocation process will be further detailed by secondary legislation published by the Energy Market Regulatory Authority (EPDK).
In the distribution process for free allowances, a benchmarking method based on sub-installations of facilities will be applied. The number of facilities included in the calculation of the benchmark value, the sectoral activity coefficient, and the free allocation rate will be determined by the Carbon Market Board based on the recommendation of the Presidency.
Operators will divide their facilities into sub-installations based on product benchmarking, measurable heat benchmarking, fuel benchmarking, or production process benchmarking. Verified annual emission data will be recorded at this sub-installation level and form the basis for benchmark calculations.
The benchmark values for each sub-installation will be announced by the Presidency by the last business day of November of the year preceding the start of each implementation period. This approach is critical for ensuring transparency, predictability, and fair competition across sectors.
Example – Chemical Production Facility Under ETS
Assume a facility that emits an annual average of 800,000 tons of CO2 (eq) and produces 300,000 tons of Chemical Component X. Based on its emission level, it falls into Category C and is therefore subject to mandatory permitting and five-year renewals.
This facility receives an allowance allocation within the national cap determined by the Carbon Market Board, either via:
Free allocation (e.g., to protect sectoral competitiveness)
Primary market purchase (through the Registry)
The facility may be divided into the following sub-components:
Reactor Unit – Product Benchmarking
Steam Generation System – Heat BenchmarkingNatural
Gas Fuel System – Fuel Benchmarking
(The electricity requirement is assumed to be met through renewable sources.)
Allowance calculations are based on efficiency benchmark values for each sub-installation. Example calculations:
Reactor Unit (Product Benchmark):
Sectoral benchmark: 1.6 tons CO2 / ton of Chemical Component X
300,000 tons x 1.6 = 480,000 tons CO2 allowable allocation
Steam Production (Heat Benchmark):
Annual steam production: 1,500,000 GJ
1,500,000 x 0.070 = 105,000 tons CO2 allocation
Fuel Use (Fuel Benchmark):
Natural gas energy: 300,000 GJ
300,000 x 0.050 = 15,000 tons CO2 allocation
Total benchmark-based allowance: 600,000 tons CO2
Total average annual emissions: 800,000 tons CO2
Thus, the facility has an annual emission gap of 200,000 tons CO2. It must close this gap through:
Purchasing emission units from primary or secondary markets or
Offsetting via carbon credits in the carbon market up to (10% of total compliance obligation as of 2028)
Alternatively, by developing energy efficiency or emission reduction projects.
NOTE: All figures, facility definitions, production volumes, emission data, benchmarks, and calculations in this example are for illustrative purposes only. This scenario is not directly linked to any real-world facility, activity, or authority. It is intended solely to explain the allocation mechanisms, benchmarking methodology, and general concepts of Emissions Trading System (ETS) implementation. Real-world application must be based on applicable national legislation, Carbon Market Board decisions, facility-specific verifications, and official regulatory guides.
Principles on Allowance Delivery and Use of the Supplementary Reserve
If operators fail to meet their obligations, administrative sanctions are imposed and any shortage of allowances is added to the following year’s compliance requirement. The supplementary reserve may be used only under specific conditions, and its price is set at 50 % above the prevailing primary and secondary market prices.
While allowance sales in the primary market follow an auction calendar, the secondary market operates through continuous trading. These structures are designed to provide price stability and liquidity.
Price‐Stability Mechanisms
Market Stability Reserve (MSR): Created to mitigate price volatility. The Presidency may transfer a portion of the allowances scheduled for the primary market directly into this reserve at set intervals.
Market Flexibility Mechanism: Flexible tools such as banking (using previous-year allowances in the future) and borrowing (using next-year allowances in the current year) are integrated into the system.
Use of Carbon Credits in the ETS: The Offsetting Mechanism
Domestic Carbon Credits Enter the System
Credits generated by projects within Türkiye can be used for up to 10 % of an ETS installation’s annual surrender obligation. Detailed rules will be defined in secondary regulations issued by the Presidency, but an illustrative example is: an operator with a 200 000 tCO₂e surrender duty may cover 20 000 tCO₂e with voluntary-market carbon credits. Such credits could arise from local renewable-energy projects, energy-efficiency measures, etc., thus fostering the domestic carbon market and enabling cost-effective compliance.
Sanctions and Fines
Under the Climate Law (Law No. 7552), administrative sanctions and fines are structured systematically and progressively for facilities that fail to meet MRV obligations. Key determinants are the facility category (A, B, C), its emission level and whether it falls under the ETS.
Article 14 sets the following fines for not submitting a verified GHG emissions report on time:
Category A facilities: ₺500 000
Category B facilities:
50 000 – 250 000 tCO₂e: ₺1 000 000
250 000 – 500 000 tCO₂e: ₺2 000 000
Category C facilities:
500 000 – 2 000 000 tCO₂e: ₺3 500 000
> 2 000 000 tCO₂e: ₺5 000 000
For installations under the ETS, these fines are doubled directly, underscoring the seriousness of ETS compliance.
(Example: a Category B plant emitting 300 000 tCO₂e that misses the deadline would pay ₺4 000 000 instead of ₺2 000 000.)
ETS Implementation Periods: Pilot Phase (2026 – 2027) and First Application Period (2028 – 2035)
Türkiye’s National ETS adopts a phased model Pilot Phase (2026 – 2027) and First Application Period (2028 – 2035) to enable gradual transition and system adaptation.
Pilot Phase (2026 – 2027)
Purpose & Design: Tests the institutional ETS framework, improves sectoral data quality and observes carbon-market infrastructure performance. Only Category B and C installations are covered, but facilities that fall to Category A during the pilot must continue compliance until period end.
Covered Activities (Sector & Technology Specific):
Fuel-fired electricity generation ≥ 20 MW (excluding household/hazardous waste)
Coke production
Roasting, sintering, pelletising of metal ore (iron-steel & aluminium)
Production and casting of iron, steel & alloys (≥ 2.5 t h⁻¹)
Processing of iron-containing metals with combustion units ≥ 20 MW
Primary aluminium & alumina production
Secondary aluminium production (units ≥ 20 MW)
Production of other non-ferrous metals (limited to steel & aluminium)
Clinker production in rotary kilns > 500 t day⁻¹
Ammonia & nitric-acid production
Allocation Principle: 100 % free allocation for all obligated activities, easing sectors into carbon costs. The Presidency may grant advance allocations, credited in the Registry (İKS) and deducted from that year’s free quota—giving companies time advantages for financial planning.
Key Constraints:
Carbon-credit (offset) use is not allowed in this phase.
Pilot allowances may be used only for pilot-period obligations.
Market trading lasts until 30 April 2029; allowances are void afterwards.
Unmet obligations roll into Year 1 of Period 1 (Law 7552 Art. 9/5).
Fines during the pilot are reduced by 80 %.
First Application Period (2028 – 2035): Full-Scale ETS
Begins with 2028 emissions and ends with 2035 emissions, covering Category B and C installations.
Sub-periods:
First Sub-period: 2028 – 2030
Second Sub-period: 2031 – 2035
Annual benchmarks for the first sub-period are published in the National Allocation Plan after verification reports. A single benchmark for the second sub-period is published by the last business day of November in the year preceding its start.
Conclusion
Publication of Türkiye’s ETS draft regulation marks the start of a new era, imposing significant technical and managerial obligations especially on high-emitting Category B and C facilities. Companies must prepare strategically, not only for compliance but also for carbon finance, competitiveness and sustainability.
Installations should classify themselves (A, B, C) according to capacity and annual GHG emissions, identify covered activities and determine their obligations.
The regulation allows domestic carbon credits for up to 10 % of ETS duties. Investing in voluntary-market projects, pre-purchase or long-term offtake agreements, and building a cost-effective offset portfolio is therefore critical.
Read the full ETS Draft Regulation here.
At Goldstein Carbon we prioritise guiding companies through this transition, sharing knowledge and ensuring clear understanding. Contact us anytime for support on ETS obligations, carbon-market strategies and effective use of voluntary carbon credits.