Recent developments
The Regulation on the Turkish Emissions Trading System (“Regulation“), which entered into force on 27 August 2026, established the fundamental regulatory framework of the Turkish Emissions Trading System (“ETS“) and provided that the scope and duration of the ETS pilot implementation period would be determined by a decision of the Carbon Market Board (“Board“), following consultation with relevant institutions, organizations and civil society organizations. You can access our detailed assessment of the Regulation in our previous bulletin.
Decision No. KPK/2026/1 (“Decision“), adopted at the first meeting of the Board, was announced by the Directorate of Climate Change (“Directorate“) on 3 September 2026. You can access the Directorate’s announcement here (in Turkish). The Decision sets out the duration of the ETS pilot implementation period, the scope of obligations during this period, and the key aspects relating to free of charge allocation. The Decision further states that the procedures and principles for the implementation of the pilot implementation period will be separately prepared and published by the Directorate in accordance with the Regulation.
Key Highlights of the Decision
- Duration and Scope of the Pilot Implementation Period
Pursuant to the Decision, the ETS pilot implementation period will cover emissions for the years 2026 and 2027. During the pilot implementation period, the ETS will apply to Category B and Category C installations carrying out the activities listed in Annex 1 to the Regulation and operating in the electricity generation, cement, iron and steel, aluminum and fertilizer sectors.
However, installations whose principal activity does not fall within the five sectors listed above but which generate electricity under Prodcom code “35.11.10.30.00” as part of their activities will remain outside the scope of the ETS during the pilot implementation period.
In addition, pressure balancing/compressor units and stations belonging to institutions and organizations facilitating the transmission of natural gas and crude oil through pipelines will also remain outside the scope of the ETS throughout the pilot implementation period. This exemption is consistent with the Regulation, which excludes activities relating to the transmission and storage of natural gas and crude oil from the scope of the ETS until the end of the first implementation period, limited to the activities carried out by such entities, except for monitoring, reporting and verification processes.
- Obligations Applicable During the Pilot Implementation Period
Pursuant to the Decision, operators covered by the ETS will be subject only to reporting obligations during the 2026 system year. Accordingly, operators carrying out the activities listed in Annex 1 to the Regulation and operating in the five sectors specified in the Decision will be required to report to the Directorate, by 30 April of each year, the greenhouse gas emissions and activity levels monitored during the period from 1 January to 31 December of the preceding year.
The Decision also provides that methodologies will be developed during the 2026 system year for the application of the complementary allowance price, which may be applied, upon operators’ requests, in auctions designated by the Directorate in respect of allowances they are required to surrender, and that the pricing mechanism will be introduced as of the 2027 system year.
- Free of Charge Allocations and Benchmark Values
The Regulation allows a portion of allowances to be allocated to operators free of charge and provides that the benchmark values to be used under the “sub-installation benchmarking methodology”, which is adopted as the principal method for the distribution of free of charge allocations, will be announced by the Directorate. Under the Decision, the free of charge allocation rate for each sector during the pilot implementation period has been set at 100% (one hundred percent) based on the benchmarking method.
For the calculation of the benchmark value to be used for the free of charge allocation, the weighted overall average of all installations will be used for installations outside the electricity generation sector. For the electricity generation sector, the benchmark value will be determined on a power plant basis, considering the weighted average emission intensity of each power plant over the preceding five years.
Conclusion
The Decision establishes that the ETS pilot implementation period will cover emissions for the years 2026 and 2027 and that, during this period, the ETS will apply to Category B and Category C installations carrying out the activities specified in Annex 1 to the Regulation and operating in the electricity generation, cement, iron and steel, aluminum and fertilizer sectors. The Decision further provides that only the emission reporting obligation will apply during the 2026 system year, that the pricing mechanism will commence in the 2027 system year and that the free of charge allocation rate during the pilot implementation period will be 100% (one hundred percent) based on the benchmarking method. The procedures and principles for the implementation of the pilot implementation period will be separately prepared and published by the Directorate in accordance with the Regulation.
