Recent development
The Regulation on the Operation of the Türkiye Emissions Trading System Market (“Regulation”) was published in the Official Gazette dated 21 October 2026 and numbered 33407 and has entered into force. Issued by the Energy Market Regulatory Authority (“EMRA”), the Regulation governs the book-entry recording, auctioning and trading of allowances under the Türkiye Emissions Trading System (“ETS”), as well as the collateral, settlement, invoicing and payment processes relating to these transactions.
As a reminder, the Türkiye Emissions Trading System Regulation (“ETS Regulation”), which entered into force on 27 August 2026, established the core framework of the ETS for greenhouse gas emission permits, allowances, and monitoring, reporting and verification. It also provided that the procedures and principles for the book-entry issuance of allowances, their recording on a holder-by-holder basis and their placement on the market would be determined by the EMRA. The Regulation, which the EMRA published in a draft form for public consultation on 23 October 2025, completes this framework and puts the market pillar of the ETS into operation.
In this respect, the Regulation sets out the rules governing how allowances, which are fungible, transferable, issued in book-entry form and each represent the right to emit one tonne of carbon dioxide equivalent greenhouse gas emissions over a specified period, are held in the Transaction Registry System (“TRS”), purchased at auctions, traded among market participants and surrendered to meet compliance obligations.
The Regulation also provides for a virtual implementation period, which will not give rise to any delivery, invoicing or payment obligations for market participants, until the TRS, the primary market and the spot allowance market actually become operational for trading, and introduces a demand-based Complementary Allowance Price Mechanism with special provisions for its application to 2026 emissions.
The Regulation is available here (in Turkish).
What Does the Regulation Introduce?
A. Market Participation and Registration Obligations
Operators covered by the ETS must open an account in the TRS, the registry in which allowances are held and related transactions are recorded on an installation basis. Accounts will be opened in the name of the operator, and operators will carry out transactions on behalf of their installation or installations. As a result, the allowances of installations belonging to the same operator can be tracked under the operator account on an installation basis.
The TRS and the allowance markets will be operated by Enerji Piyasaları İşletme Anonim Şirketi (“Market Operator”). The application process for opening a TRS account and ETS market transactions will be carried out through the ETS Market Management System (“ETSMMS”), the Market Operator’s trading platform, which also includes the TRS.
To open an account, operators must sign a participant agreement with the central settlement institution, which will carry out financial processes such as collateral management and cash clearing, apply to the Market Operator through the ETSMMS and sign a TRS participation agreement with the Market Operator.
The application must include the operator registration form, the originals or notarized copies of the signatories’ authorization documents, a copy of the Turkish Trade Registry Gazette and the TRS participation agreement.
The Market Operator will review applications within 10 (ten) business days. If any deficiency is identified, the applicant will be notified of the deficiencies and informed that the registration cannot be completed unless they are remedied, and will be given an additional period of 10 (ten) business days to remedy them. If the deficiencies are not remedied within this period, the registration will not be completed and a new application will be required.
However, opening an account alone will not be sufficient to trade on the market. The Regulation defines market participants as operators covered by the ETS that have signed a TRS participation agreement with the Market Operator. These operators must also register separately with the relevant market by signing a primary market participation agreement to purchase allowances at auctions, and a spot allowance market participation agreement to trade on the spot market. Since the definition of market participant only covers operators within the scope of the ETS, the participation of other persons (e.g., financial intermediaries) is not envisaged at this stage.
B. Holding and Use of Allowances in Accounts
Under the ETS Regulation, operators must surrender a number of allowances corresponding to their verified greenhouse gas emissions by the last business day of November of the relevant compliance year. The Regulation sets out how this surrender obligation will be fulfilled through the TRS.
The TRS will keep the records relating to the issuance of allowances, their holding in operator accounts, their transfer between accounts and their use for compliance purposes. Once the electronic applications of operators carrying out activities covered by free allocation to receive free allowances and the related approval processes before the Directorate of Climate Change (“Directorate”) are completed, the allowances allocated free of charge will be transferred by the Market Operator to the relevant installation accounts of the operators. Free allowances may be transferred between a market participant’s own installations and may also be sold through bilateral allowance agreements and on the secondary markets. Given that the Carbon Market Board has set the free allocation rate at 100% (one hundred percent) for the pilot implementation period, this option is particularly important for operators that reduce their emissions, as it allows them to monetize their unused allowances.
At the operator’s request, the Market Operator will link the allowances to be surrendered with the verified greenhouse gas emissions and retire them electronically. As a result of this process, referred to in the Regulation as “retirement”, the allowances will be deemed used and may no longer be traded. Allowances that have not been retired by the end of their validity period will be deleted through the TRS.
Banking, which allows allowances to be used in later years of the relevant implementation period, and borrowing, which allows allowances for later years to be used for the compliance year within the same implementation period, are provided for in the ETS Regulation as market flexibility mechanisms, and will also be carried out through the TRS.
As also provided under the Climate Law, allowances may not be subject to collateral agreements. In addition, free allowances that are subject to the surrender obligation may not be attached unless they have been transferred out of the TRS account to which they were first credited. The Regulation also expressly provides that any transfer, assignment or pledge over movable property made in connection with obligations under the Regulation will not be enforceable against the Market Operator, while receivables and rights under the Regulation may be assigned, pledged or transferred only in accordance with the conditions set by the Market Operator and with its approval. As these restrictions prevent allowances from being used as collateral in financing transactions, operators will need to take this into account when structuring their financing.
C. Auctioning and Trading of Allowances
Allowances will be traded on the primary and secondary markets. On the primary market, allowances will be auctioned, while on the secondary markets, market participants may buy and sell allowances through continuous trading. The secondary markets consist of the spot allowance market and, if established, the allowance futures market. On both markets, the Market Operator will act as the central counterparty, serving as buyer to every seller and seller to every buyer. As a result, market participants will not be directly exposed to the payment risk of their counterparties.
- Auctions on the Primary Market
On the primary market, allowances will be auctioned under a single-seller model at auctions held by the Market Operator in line with the auction calendar determined by the Directorate. The auction calendar will be announced within 15 (fifteen) business days following the publication of the National Allocation Plan, and the volume and session hours of each auction will be announced at least 10 (ten) business days before the auction date.
Auctions will be held in a sealed-bid format, in which market participants may submit only bids to buy, without seeing other participants’ bids, and their bids will be limited to the collateral they have provided. Bids will be ranked starting from the highest price, and among bids at the same price, priority will be given to the bid submitted first. The volumes of allowances offered for sale are matched with the bids to buy; the price of the last bid that fully or partially matches the volume of allowances auctioned will be set as the Allowance Reference Price (“ARP”) and all successful bidders will pay the ARP for the allowances they purchase, regardless of the price they bid.
If the total bid volume falls below the volume of allowances auctioned, the auction will be cancelled. As also provided under the ETS Regulation, the volume of allowances from the cancelled auction will be distributed equally among the remaining auctions in the relevant year under the auction calendar. If the last auction of the year is cancelled, it will be repeated within 15 (fifteen) business days and may be repeated up to 2 (two) times. If there is not enough time in the relevant year for the repeat auctions, or if the auction is cancelled again after the second repeat, the allowances will be auctioned in the following calendar year.
- Trading on the Spot Allowance Market
On the spot allowance market, currently the only component of the secondary markets, participants may submit buy and sell orders through continuous trading during the session. Orders will be matched based on price priority and, among orders at the same price, time priority. Sell orders may not exceed the tradable allowances held in the participant’s account plus the allowances purchased in the same session, and buy orders may not exceed the participant’s collateral. Accordingly, selling allowances not held in the account (i.e., short selling) is not permitted.
Allowances subject to a sell order will be blocked in the account until the order is finalized. For matched transactions, allowances will be transferred from the seller’s account to the buyer’s account once the trade is confirmed. Market participants will not have access to information about the counterparties they are matched with.
Sessions will be held on at least 4 (four) business days per month, between 10:00 and 15:00. The Market Operator may change session days and durations or open new sessions, provided that it gives EMRA and, through the ETSMMS, market participants at least 1 (one) business day’s prior notice. Unmatched orders will be cancelled after the session closes.
- Bid Size, Price and Volume Limits
On both markets, the minimum bid size is 1 (one) lot, which corresponds to 100 allowances, and prices will be submitted in increments of TRY 0.50 per tonne of carbon dioxide equivalent. For sessions held in the last month of each year, the Market Operator may change the spot allowance market lot value if needed, subject to prior announcement.
The Carbon Market Board (“Board”) is authorized to set minimum and maximum allowance price ranges (price floor and ceiling) where necessary. However, these ranges will not apply to additional reserve auctions or the Complementary Allowance Price Mechanism.
Where necessary, EMRA will also determine, after obtaining the Directorate’s opinion, the procedures and principles for the maximum volume that may be bid for on the primary market and the total volume of allowances that may be held in TRS accounts.
- Allowance Futures Market
The Regulation does not include specific rules on the allowance futures market. It provides that the procedures and principles for establishing and operating the allowance futures market will be determined by EMRA at a later stage, in coordination with the Ministry of Environment, Urbanization and Climate Change, the Ministry of Energy and Natural Resources and the Capital Markets Board of Türkiye.
D. Bilateral Allowance Agreements
Unless the Energy Market Regulatory Board (“EMRA Board”) decides otherwise, market participants may buy and sell allowances directly through bilateral agreements governed by private law. These agreements will not be subject to the approval of the EMRA Board, but information regarding these agreements must be notified to the Market Operator.
Allowances may be transferred only if both parties hold an account in the TRS and jointly notify the agreement through the ETSMMS. A notification made by only one market participant will not be valid. At a minimum, the notification must include the buying and selling market participants and their relevant installations and the volume of allowances.
Notifications may be made on full business days between 10:00 and 17:00 and may be cancelled unilaterally during this window. The allowances subject to the notification will be blocked in the seller’s account and transferred to the buyer’s account at 17:05 on the same day. Since allowances can pass to the buyer’s account only through a joint notification via the ETSMMS and a transfer in the TRS, it will be important for the parties to structure the payment and transfer mechanisms in their bilateral agreements accordingly.
E. Additional Reserve Auctions
The ETS Regulation provides for an additional reserve mechanism for installations that have difficulty meeting their surrender obligations, and the Regulation now governs the market side of this mechanism. Accordingly, additional reserve auctions will be open to market participants that meet the conditions under the ETS Regulation and that the Directorate has notified to the Market Operator. The auctions may be held, in line with the Board’s decision, upon a notification by the Directorate made at least 7 (seven) business days in advance.
The rules applicable to the primary market will apply to additional reserve auctions. However, in line with the ETS Regulation, the minimum bid price will be set at 50% (fifty percent) above the higher of the weighted average prices on the primary market and the spot allowance market over the last 3 (three) months, as of the last business day of November. The maximum price will be determined by EMRA after obtaining the Directorate’s opinion.
Bids may not exceed the difference between the outstanding surrender obligation and the allowances held in the market participant’s account on the last business day before the auction. Allowances purchased will be transferred directly to the retirement account of the relevant installation and may be used only to fulfill the surrender obligation.
F. Financial Obligations of Market Participants
- Collateral Obligation
Market participants must provide collateral to secure their payment obligations. For this purpose, participants will open collateral and cash accounts in their own names with the central settlement institution. The collateral account will take into account the invoice amounts expected to arise from transactions whose payment date has not yet passed, as well as bids submitted during the session.
Eligible collateral includes cash in Turkish lira, US dollars or euros; unconditional and open-ended electronic letters of guarantee denominated in Turkish lira, US dollars or euros and issued by banks operating in Türkiye, including those backed by counter-guarantees of foreign banks or financial institutions; and government domestic debt securities and Eurobonds issued by the Ministry of Treasury and Finance, as well as lease certificates issued by Hazine Müsteşarlığı Varlık Kiralama Şirketi.
A valuation coefficient will apply to assets other than Turkish lira cash and Turkish lira electronic letters of guarantee, and all costs relating to collateral will be borne by the market participant.
If the collateral is insufficient, the participant will be asked to top up the shortfall, and a market participant that fails to do so may not continue trading. Collateral exceeding the required amount may be returned upon the market participant’s request, provided that it is eligible for return.
- Participation and Transaction Fees
EMRA will set each year the “market operation fees” charged for transactions carried out by market participants on the primary and secondary markets. The determination and collection of these fees will be governed by a communiqué.
The market operation fee will consist of an annual participation fee, a fee for primary and secondary market transactions, and a fee for transactions under bilateral allowance agreements. The annual participation fee will be reflected in the first invoice issued after registration for market participants registering with the TRS for the first time, and in the first January invoice each year for existing participants. The annual participation fee will not be refunded upon exit from the market.
Service fees notified monthly by the central settlement institution must also be paid within 3 (three) business days following notification.
- Settlement, Invoicing and Payments
After each session, the market participants’ payables and receivables will be calculated based on the matched allowance volumes and prices. This process, referred to as “settlement”, will be carried out on a session basis for the primary market and the spot allowance market, based on trade confirmations.
Since market participants can only be buyers on the primary market, primary market transactions will give rise only to payables for market participants. On the spot allowance market, by contrast, market participants can be both buyers and sellers, so transactions on this market may give rise to both payables and receivables. On both markets, payables will be calculated by multiplying the matched price by the volume bought, and, on the spot allowance market, receivables by multiplying the matched price by the volume sold. In addition to these payables and receivables, settlement notifications will include late payment surcharge items relating to invoice payments, the market operation fee and an adjustment item.
Preliminary settlement notifications setting out the amounts that market participants will pay to the Market Operator, or that the Market Operator will pay to market participants, for each session as a result of the settlement calculations for the primary and/or secondary markets will be announced by 16:00 on the session day, and final settlement notifications by 17:00. The Market Operator will issue the invoice on the business day following the day on which the final settlement notifications are announced to the relevant market participants through the ETSMMS, based on the amounts in the settlement notifications. The date on which the final settlement notification is published will also be deemed the notification date of the invoice for market participants.
The receivables and payables of market participants that are both creditors and debtors in the same session will be netted off automatically after the final settlement notification is published. Market participants that remain net debtors after netting must pay their net payable through intermediary banks into the Market Operator’s account with the central settlement institution by the second business day following the invoice notification date at the latest.
Market participants that remain net creditors after settlement must send their invoices to the Market Operator within 7 (seven) days at the latest following the announcement of the final settlement notification. The Market Operator will pay these invoices within 3 (three) business days at the latest following the notification of the invoice, by distributing the total amounts collected for the relevant session in proportion to the participants’ net receivables. If the Market Operator fails to meet this deadline, default interest will apply to the amount due at the rate determined under Article 51 of Law No. 6183 on the Procedure for the Collection of Public Receivables (“Law No. 6183”).
G. Objection Rights
The Regulation provides for short objection periods for market transactions. Trade confirmations on the primary and spot markets may be objected to within 20 (twenty) minutes of notification, and an objection will be accepted only if the error is attributable to the Market Operator. Trade confirmations not objected to in time will become binding as a contract with respect to the prices and volumes they contain. Objections to preliminary settlement notifications may be raised through the ETSMMS until 16:30 on the same day, and objections to invoices must be submitted in writing to the Market Operator within 8 (eight) days of notification. Reasoned written objections to final settlement notifications will be resolved within 10 (ten) business days, and disputes concerning the Market Operator’s decision will be reviewed by EMRA.
An objection to settlement notifications or invoices will not suspend the payment obligation. Under the Regulation, notifications by the Market Operator will primarily be made through the ETSMMS. Notifications not required to be made through the ETSMMS will be made in writing, and notifications sent to the registered electronic mail (KEP) address will be deemed served. Market participants must therefore keep their contact details up to date, including their registered electronic mail (KEP) addresses, and notify any changes through the system.
H. Consequences of Non-Compliance and Trading Restrictions
If the Directorate notifies the Market Operator that a market participant has failed to submit its verified greenhouse gas emission report on time, the market participant will be prevented from carrying out any transactions with the allowances in its TRS account other than to fulfil its surrender obligation. The restriction will be lifted once the Directorate notifies the Market Operator that the report has been submitted. This restriction applies independently of the administrative fines imposed under the Climate Law for failure to submit the verified greenhouse gas emission report on time, and directly affects the ability of operators to trade on the market.
If the net payable arising from an invoice is not paid within 2 (two) business days following the notification of the invoice, default interest will apply to the amount due at the rate determined under Article 51 of Law No. 6183. However, the market participant will not be deemed in default if the payable is automatically covered from the balance in its ETS cash account and/or from its Turkish lira cash collateral exceeding the total required collateral.
If the payable cannot be covered from the cash account opened for the ETS market, the excess Turkish lira cash collateral or the Turkish lira cash collateral, the market participant will be deemed in default without the need for any further notice. In that case, the Market Operator will enforce its other collateral and pursue legal remedies, and the participant will be unable to trade on the primary and secondary markets until it has fulfilled all of its financial obligations.
Separately, if the Directorate notifies the Market Operator that an installation falls outside the scope of the ETS, the installation may only sell the allowances remaining in its account after it has fulfilled its surrender obligations. Such installations with an allowance shortfall may only buy allowances, limited to the volume needed to meet their existing obligations.
Finally, the Regulation refers to the Regulation on Transparency and Market Abuse in Energy and Environmental Markets for the Market Operator’s obligations relating to market abuse. Given that this regulation will enter into force on 1 January 2027 and also covers the ETS market, market participants will also need to observe the rules on market integrity in their allowance transactions.
I. Entry into Force, Virtual Implementation and Special Provision for 2026
The Regulation entered into force on 21 October 2026, the date of its publication in the Official Gazette. Until the TRS, the primary market and the spot allowance market become operational, a virtual implementation will be carried out on the ETSMMS, which will not give rise to any delivery, invoicing or payment obligations. The Regulation does not specify a date on which the markets will open for trading.
The Regulation also provides that the Complementary Allowance Price Mechanism, whose framework is set out in the ETS Regulation, may apply specifically to 2026 emissions. Accordingly, market participants may request to use this mechanism for a volume of allowances equivalent to their verified greenhouse gas emissions on an installation basis, while the Directorate will determine the application process, the issuance of allowances and the auction dates. No ARP will be calculated at these auctions, and the matched price for each participant will be the price of its own bid to buy.
A notable feature of the mechanism is that allowances purchased under it will be transferred directly to the retirement account of the relevant installation but will not count towards the surrender obligation. Read together with the Board’s decision that only the reporting obligation will apply in the 2026 system year and that the price mechanism will be launched as of the 2027 system year, the 2026 mechanism appears to be designed as a voluntary, demand-based option for operators rather than a compliance tool.
Conclusion
The Regulation clarifies the market pillar of the allowance mechanism framed under the ETS Regulation and sets out, for the first time in detail, the procedures and principles for the registration, trading and surrender of allowances. Given that the price mechanism will be launched as of the 2027 system year during the pilot implementation period, it is important for operators covered by the ETS to complete the necessary preparations for market participation in the short term.
In this respect, operators would benefit from first preparing the documents and authorizations required to open a TRS account and register for the primary and spot markets, finalizing the agreements with the central settlement institution and intermediary banks, and planning in advance for the liquidity needs that may arise from collateral obligations and short payment deadlines. Given the very short objection periods, operators will also need to set up internal processes and designate responsible persons to monitor market transactions. Operators planning to enter into bilateral allowance agreements should structure them in line with the joint notification and transfer mechanism, and financing structures should take into account that allowances cannot be used as collateral.
Finally, many matters have been left to secondary legislation, including market operation fees, the maximum buy volume on the primary market and the volume of allowances that may be held in accounts, the futures allowance market, and the implementation rules of the Complementary Allowance Price Mechanism for 2026. These developments should be closely monitored, together with the virtual implementation process and the date on which the markets open for trading.
