EditTurkey launches carbon market to keep carbon-tax money at home
The Turkish carbon pricing is designed not simply as a tax but as a mechanism through which Turkey can raise money domestically and use it to support decarbonisation
Turkey has established its emissions trading system, setting up a domestic carbon market that could help shield Turkish exporters from part of the financial impact of the EU’s Carbon Border Adjustment Mechanism (CBAM), while channelling carbon revenues into the country’s own green transition.
The regulation establishing the “Türkiye Emissions Trading System” (TR ETS) was published in the Official Gazette on Thursday, bringing into force a framework for monitoring, reporting and verifying greenhouse gas emissions and regulating the domestic carbon market.
“On our path towards achieving our Green Transition target, we have established the legal framework for the Emissions Trading System and the carbon market,” environment and climate change minister Murat Kurum said following the publication of the regulation.
The move is strategically important for Turkey’s trade with the EU, its largest trading partner. The EU’s CBAM entered its definitive phase in January 2026, requiring importers of covered goods to pay for the carbon embedded in products such as steel, aluminium, cement, fertilisers, electricity and hydrogen.
The EU system also contains an important incentive for trading partners to introduce their own carbon prices: where a carbon price has already been paid in the country of production, the corresponding amount can be deducted from the importer’s CBAM liability.
That effectively creates a choice for countries exporting carbon-intensive goods to the EU: allow the carbon cost to be collected through the EU border mechanism, or establish a domestic system and collect at least part of that revenue themselves.
The Turkish carbon pricing is designed not simply as a tax but as a mechanism through which Turkey can raise money domestically and use it to support decarbonisation. If a Turkish steelmaker, cement producer or aluminium plant has already paid an eligible carbon price in Turkey, that payment can reduce the amount owed under CBAM.
The result is not that Turkish exporters automatically pay nothing to the EU. Rather, the carbon bill can increasingly be collected in Ankara instead of at the EU border. That distinction is crucial as EU system CBAM moves from a reporting exercise into a significant cost for carbon-intensive trade.
The Turkish ETS is expected to operate in a pilot phase in 2026–2027, followed by its first implementation period from 2028 to 2035. That gives Turkish industry a relatively narrow window to adapt before the EU’s carbon border regime becomes an increasingly significant factor in trade.
For Brussels, the development is also a test of whether CBAM can achieve one of its central objectives: encouraging trading partners to introduce their own carbon prices rather than simply transferring emissions-intensive production outside the EU.
Keeping the carbon bill at home
The new Turkish system requires covered installations to obtain an emissions permit, valid for five years, with renewal applications to be submitted six months before expiry.
Facilities will also be classified according to their emissions. Category A covers installations with annual emissions of up to 50,000 tonnes of CO₂ equivalent, Category B those above 50,000 and up to 500,000 tonnes, and Category C installations exceeding 500,000 tonnes.
Schools, universities, hospitals and military installations are excluded from the ETS’s trading obligations, while certain research facilities, exclusively biomass-fuelled installations and military elements are also outside the regulation’s scope. These exemptions do not remove all monitoring requirements.
The financial logic behind the system is particularly important. Under Turkey’s climate law, revenues from emissions permits, primary-market allowance sales, market-stability operations, authorised international carbon credits and part of administrative fines are recorded as special revenues and allocated to the Climate Change Directorate.
A different model
The Turkish model is built around product-based benchmarks and emissions intensity rather than an absolute national emissions cap. The government has been developing sectoral benchmarks for industries including cement, fertilisers, iron and steel and power generation as part of the design of free allocations.
That gives Turkish industry more room to expand production without automatically increasing its carbon compliance burden, provided emissions per unit of output improve.
Under an intensity-based system, a factory can increase total production while still improving its performance against a benchmark. It could become a significant competitive advantage for Turkey’s export-oriented industries, particularly in sectors exposed to CBAM.
But it also creates a potential weakness: if industrial output rises faster than emissions intensity falls, absolute emissions can continue increasing even while companies become more carbon-efficient per tonne of product.
The tension is particularly acute in Turkey’s electricity sector. The country still relies heavily on fossil fuels, while coal and gasfired power plants are expected to receive substantial protection during the initial phase of the ETS through free allocations and transitional arrangements.
Sources: Hürriyet, BTA, Ember think tank
Caption: Environment and climate change minister Murat Kurum [@GreenlineAA on X]
Updated: August 28, 2026 - 11:05
