All information is accurate as of 22nd July 2025
Author: Sawal Bacha
After years of preparatory work and months of delays, Türkiye has passed a landmark Climate Law that lays the foundations for its national response to climate change. The legislation not only defines the legal and institutional structure for reaching net zero emissions in 2053, but also sets the stage for a domestic Emissions Trading System (ETS).
The new Climate Law also establishes the possibility of implementing a national Carbon Border Adjustment Mechanism (CBAM).
What’s in the Climate Law?
Türkiye’s Climate Law sets out core objectives that include reducing greenhouse gas (GHG) emissions, advancing climate adaptation, and creating a coherent legal framework for climate governance, all geared towards achieving net zero emissions by 2053.
The legislation, expected to pass in April this year, was delayed when the government opted for further review in light of feedback from industry. However, following a vote in parliament, the law was passed on 2nd July 2025.
The Climate Law confirms the launch of a pilot ETS. While the ETS will be overseen by a newly created Carbon Market Board (CMB), the existing Presidency of the Directorate of Climate Change will be responsible for managing ongoing operations, including issuing GHG permits that authorise a participant to legally emit GHGs and allocate free allowances, while also managing emissions monitoring, reporting and verification. The Presidency will also regulate offset mechanisms within the ETS, setting limits and ensuring that carbon credits meet compliance and quality standards.
The exact date of the launch of the pilot ETS is not specified but it could be as soon as 2026.
The law also allows for the creation of a Carbon Border Adjustment Mechanism (CBAM) to regulate the carbon footprint of imports, aligning Türkiye with global climate policy trends.
Turkish ETS: What participants should know
Functioning:
- While the CMB is yet to define the timeline and operational details, we expect the ETS pilot phase to span two years before the system is fully launched.
- This phase will cover sectors which pollute the most such as cement, energy, and iron and steel. Details on sectoral coverage, timing, and cap-setting rules will be established through secondary legislation.
- During the pilot phase, participants are deemed to have temporary permits and must obtain formal GHG permits from the Presidency of the CMB within three years of the law’s entry into force.
Enforcement:
- Participants are required to surrender allowances corresponding to their verified emissions over the course of each compliance period.
- Participants that fail to submit verified emissions reports or breach monitoring requirements will face administrative fines ranging from 500,000 to 5 million Turkish Liras (approximately £9,200 to £92,000 as of 21st July 2025).
- In addition to fines for non-compliance, participants that fail to surrender allowances equivalent to at least 80% of their verified emissions at the end of each compliance period for three consecutive years shall have their GHG permit revoked, and will not be issued a new permit for a period of between three and six months. The cancellation of their GHG emission permit would prevent participants from legally emitting GHGs or from receiving free allowances.
- All fines outlined in the law will be doubled following a first violation and will double again for each subsequent offence committed within a three-year period from the date of the initial breach.
- During the pilot phase, administrative fines for failure to meet obligations will be reduced by 80%.
Connecting Compliance and Voluntary Carbon Markets:
- The legislation provides for the use of voluntary carbon offsets to meet part of a participant’s compliance obligations. However, the allowable proportion, credit type, methodologies and geographic bounds remains unspecified, and is expected to be clarified in secondary regulations.
ETS revenues:
- The Ministry of Environment, Urbanisation and Climate Change will take the lead in developing financial instruments and incentives to encourage climate-focused investment.
- To promote an inclusive green transition, 10% of carbon revenue generated from the ETS will be directed toward fair transition initiatives, aimed at supporting vulnerable communities and advancing social equity.
Turkish CBAM: What participants should know
The new legislation introduces the legal basis for a national CBAM, enabling Türkiye to impose a carbon price on the embedded emissions of imported goods. This move is designed to level the playing field between domestic producers subject to carbon pricing and foreign competitors, while also aligning Turkish climate policy with the EU.
The Ministry of Trade will be responsible for determining which sectors fall under the national CBAM, developing emissions reporting requirements for importers, and integrating carbon pricing into customs procedures.
Next steps for companies
Türkiye’s Climate Law lays the foundation for a domestic carbon market that aligns with international standards and global trading systems. For businesses that fall under its scope, early engagement will be critical to ensure compliance, maintain competitiveness and take advantage of emerging market opportunities.
Participating in the pilot phase of the ETS offers participants a chance to get familiar with regulatory requirements while benefiting from temporary flexibilities such as reduced penalties. This period should be used to establish robust internal monitoring systems, build emissions reporting capacity, and begin planning long-term reduction strategies that will position firms for success as the market matures.
If the Turkish CBAM is implemented in secondary regulations, Turkish imports will be subject to a carbon price under the national CBAM framework. Turkish importers must prepare in advance and develop risk mitigation strategies to prepare for Turkish CBAM related costs.
Conclusion
The new Turkish Climate Law reflects the global momentum towards carbon pricing.
As the policy framework evolves, Redshaw Advisors will continue to monitor market and regulatory developments closely.
By tracking these developments, we help ensure businesses are well positioned to navigate the transition, manage emerging carbon-related risks, and respond strategically to the evolving policy landscape.
As Türkiye moves toward carbon pricing and border adjustments, the financial stakes for businesses are rising. Redshaw Advisors supports companies in understanding and managing the financial risks tied to evolving carbon markets. Through a structured, strategic approach, we help you navigate uncertainty, respond to market changes, and make informed decisions that protect your bottom line. With Redshaw Advisors as your partner, you gain clarity, confidence, and control in a rapidly shifting carbon landscape.
Contact us to discuss how these policy developments could impact your business and explore tailored strategies to navigate these developments effectively.
