Turkey’s Emissions Trading System and Climate Law No. 7552: Allowances, the EPİAŞ Carbon Market, Surrender and Sanctions, Market Abuse Rules and Sustainability Reporting for Investors in Turkish Companies

Climate Law No. 7552, in force since 9 July 2025, created the legal basis for a Turkish Emissions Trading System (TR ETS). Two regulations published in 2026 set out how it works. The Turkish Emissions Trading System Regulation (Official Gazette 27 August 2026) covers installations whose conservatively calculated annual emissions exceed 50,000 tonnes of CO2 equivalent. Each year they must surrender allowances matching their verified emissions by the last business day of November. The Regulation on the Operation of the ETS Market (Official Gazette 21 October 2026) appoints EPİAŞ as market operator and central counterparty. For now, only operators covered by the ETS may take part in the market. Failing to surrender allowances leads to a fine for each missing allowance of twice the higher of the average primary and secondary market prices, and to an obligation to make up the shortfall the following year (Climate Law Arts. 9(5) and 14(4)(c)). Allowances cannot be used as collateral, and liquidation or a concordat does not release an operator from its surrender obligation (Art. 9(9)–(10)). EPDK’s regulation on transparency and market-disrupting behaviour in energy and environmental markets prohibits insider dealing and manipulation in the ETS market and enters into force on 1 January 2027. Separately, large companies prepare sustainability reports under the Turkish Sustainability Reporting Standards (TSRS), and sustainability auditors are liable for false, incomplete or misleading reports (Sustainability Audit Regulation Art. 30). This guide explains these rules for foreign institutional investors in Turkish companies. It reflects the legislation in force as at 26 October 2026.

Why the carbon market matters to investors

For an investor in Turkish listed companies, the emissions trading system matters in three ways. First, it puts a price on the emissions of large industrial and energy installations. Allowance costs, free allocation and sanctions affect the earnings and valuation of companies in covered sectors. Second, a new market has been created with its own operator, clearing arrangements and market abuse rules. The integrity of that market affects the prices companies pay and the information investors rely on. Third, carbon costs, permits and sanctions can be inside information for listed issuers and must be reflected accurately in financial statements and sustainability reports. Misleading information on these matters carries the same legal risks as any other misleading disclosure.

The system is at an early stage. The Climate Law provides for a pilot period before full application, and the market regulation provides for a virtual trading phase before the primary and spot markets begin operating. Investors should therefore follow both the rules described here and the decisions that will put them into practice.

The legal framework

The Climate Law sets the objective of combating climate change in line with the green growth vision and the net zero emission target (Art. 1(1)). It establishes the ETS (Art. 9), allocates responsibilities (Art. 10), regulates carbon credits and offsetting (Art. 11) and sets administrative sanctions (Arts. 14–16). The Climate Change Presidency establishes the ETS, prepares national allocation planning and distributes allowances. The market operator, defined in the Law as Energy Markets Operation Inc. (EPİAŞ), operates the ETS market (Arts. 2(1)(ü) and 9(1)–(2)).

Governance is shared. The Carbon Market Board, chaired by the Minister of Environment, Urbanisation and Climate Change, includes deputy ministers, the President of SPK, the President of the Energy Market Regulatory Authority (EPDK) and the President of the Climate Change Presidency. It approves the national allocation plan, decides on free allocation and the amount of allowances auctioned, and sets the extent to which offsetting may be used (Climate Law Art. 10(1)(a)). EPDK sets the rules on market surveillance of market-disrupting behaviour in the ETS market after obtaining SPK’s opinion (Art. 10(1)(ç)). Cash settlement and collateral management are carried out by a central settlement institution, defined as an institution established as a central clearing institution under the Capital Markets Law (Arts. 2(1)(r) and 10(1)(e)).

Which installations are covered

Monitoring, reporting and verification. Installations carrying out the activities listed in Annex 1 to the ETS Regulation must monitor, report and verify their greenhouse gas emissions (ETS Regulation Art. 2(1)(a)). Installations used for research and development, those using biomass exclusively, and military units are outside the Regulation (Art. 2(2)).

The ETS itself. The ETS covers Category B and Category C installations (Art. 5(1)). These are installations whose annual emissions, calculated conservatively on the basis of installed capacity, exceed 50,000 tonnes of CO2 equivalent. Category C installations are those above 500,000 tonnes (Art. 4). Installations of schools, universities, hospitals and the defence industry are outside the ETS for the activities they carry out, but remain subject to monitoring, reporting and verification (Art. 5(2)–(3)). Transmission and storage of natural gas and crude oil are outside the ETS until the end of the first implementation period, except for monitoring, reporting and verification (Provisional Art. 6).

Emission permits. Covered operators need a greenhouse gas emission permit from the Climate Change Presidency to carry out their activities (Climate Law Art. 9(3); ETS Regulation Art. 6). Operators that will be within the ETS must obtain permits within three years of the Law’s entry into force. During that period they are deemed to hold a permit once. The Presidency may extend the period by up to two years on a decision of the Carbon Market Board (Climate Law Provisional Art. 1(2)).

Allowances, the cap and free allocation

The cap. The ETS cap is set using an emissions-intensity-based approach and announced in the National Allocation Plan. The Plan is published in the Official Gazette within 60 days of the deadline for verified emission reports for the system year (ETS Regulation Art. 11; Climate Law Art. 9(7)).

Issue and distribution. Allowances are issued in book-entry form in the transaction registry and are offered either through auctions in the primary market or free of charge (ETS Regulation Art. 12(1)). Free allowances may be given on the basis of historical emissions or benchmarks (Climate Law Art. 9(6)). Allowances must be issued electronically in book-entry form and rights over them tracked by holder (Art. 9(9)). One allowance corresponds to one tonne of CO2 equivalent (ETS Market Regulation Art. 22(1)(g)).

Validity and flexibility. Allowances are valid until the end of the implementation period in which they were issued, and invalid allowances are cancelled in the registry (ETS Regulation Art. 15(1)–(2)). A market stability reserve may be used to stabilise prices through the primary market. Banking allowances for later years and borrowing from later years within an implementation period may be permitted (Art. 19). The Carbon Market Board may set minimum and maximum price ranges where necessary (Art. 21(1)).

Legal protections. Allowances may not be the subject of collateral agreements. Free allowances needed for surrender cannot be attached until they are transferred from the registry account to which they were first credited (Climate Law Art. 9(9)). Collateral given for financial settlement and the assets in the default guarantee account cannot be used for other purposes, attached, pledged, affected by liquidation decisions, included in a bankruptcy estate or made subject to interim measures (Art. 9(11)).

Surrender, sanctions and insolvency

The surrender obligation. Covered operators must surrender allowances corresponding to their verified annual emissions (Climate Law Art. 9(5)). They do so for each installation through the registry by the last business day of November of the obligation year (ETS Regulation Art. 16(1)). An operator that does not surrender enough must, in the following year, also surrender the missing amount (Climate Law Art. 9(5); ETS Regulation Art. 16(2)).

The reserve. Under conditions in the Regulation, an installation that is short of allowances may use an additional reserve, by decision of the Carbon Market Board. The reserve is limited to 10% of the cap in the primary market and priced at a premium over recent market prices (ETS Regulation Art. 16(5)–(6)). Operators may also apply for a complementary allowance price mechanism in designated auctions (Art. 20).

Sanctions. The Climate Law provides for several sanctions:

1. 1. If a verified emission report is not submitted on time, transactions in the operator’s registry accounts are blocked, except for surrender, until the report is submitted. This is in addition to the fine (Art. 14(4)(a); ETS Market Regulation Art. 4(8)).
2. 2. Operating without a valid emission permit is fined. Where verified reports exist, the fine is a fixed amount per tonne of the highest emissions reported in the last five years (Art. 14(4)(b)).
3. 3. For each allowance not surrendered on time, the fine equals twice the higher of the weighted average primary market price and the weighted average secondary market price for the last three months of the year to which the report relates (Art. 14(4)(c)).
4. 4. If an operator fails to surrender at least 80% of its allowances on time for three consecutive years, its emission permit is cancelled and no new permit is issued for three to six months (Art. 14(4)(ç)).
5. 5. Failing to provide information or giving misleading statements is fined (Art. 14(6)).

During the pilot period, administrative fines for failing to meet the Law’s obligations are reduced by 80% (Provisional Art. 1(1)). Fixed amounts of fines are revalued from time to time and are not stated here. Sanction decisions can be challenged before the administrative courts, but filing a case does not stop collection (Art. 16(2)).

Insolvency. Ceasing operations before the surrender date, liquidation of the operator or a concordat decision do not prevent the surrender obligation from being performed (Climate Law Art. 9(10); ETS Regulation Art. 16(3)). For investors in companies under financial pressure, carbon obligations therefore continue to run during insolvency proceedings. The insolvency framework is explained in our guide to when a Turkish issuer or broker becomes insolvent.

The ETS market operated by EPİAŞ

Structure. EPİAŞ operates the primary market, where allowances are distributed by auction to covered operators, and the secondary markets, where allowances are traded among participants (ETS Market Regulation Art. 4(1)). It does so without discrimination and on the principles of transparency and accountability (Art. 5(1)). It acts as central counterparty, becoming buyer to every seller and seller to every buyer (Art. 5(5)). Trading takes place through the ETS Market Management System, which includes the transaction registry (Art. 4(2)).

Accounts. Covered operators must open accounts in the registry. To do so, they sign a participant agreement with the central settlement institution, apply to EPİAŞ and sign the registry participation agreement (Art. 7(1)–(4)). Registration in the spot market also requires a spot market participation agreement (Art. 10).

Auctions and the spot market. Allowances are auctioned according to a calendar published within 15 business days of the National Allocation Plan (ETS Regulation Art. 17(1)–(2)). The secondary markets consist of the spot allowance market and, if established, a futures market (ETS Market Regulation Art. 21(2)). The spot market operates by continuous trading. The minimum bid is one lot of 100 allowances, and participants may not bid beyond their collateral (Art. 22(1)). The procedures for a futures allowance market are to be set by EPDK in coordination with the Ministry of Environment, the Ministry of Energy and SPK (Art. 30). Bilateral agreements between participants must be notified jointly through the system. The allowances are blocked until transfer at 17:05 on the day of notification (Art. 31).

Collateral and confidentiality. Participants provide collateral to secure the continuity of payments and protect creditor participants (Art. 35(1)). EPİAŞ and the central settlement institution may not share participant-level trading and collateral information with third parties other than authorities empowered by law (Arts. 5(7) and 34(1)(l)). Information provided by participants is kept for at least ten years (Art. 53).

Start of trading. Until the registry, the primary market and the spot market start operating, a virtual phase is run without delivery, invoicing or payment obligations (Provisional Art. 1). For 2026 emissions, a complementary price mechanism may be applied at participants’ request, and allowances bought this way are transferred directly to the relevant installation’s surrender account (Provisional Art. 2). Clearing in Turkish capital markets more generally is explained in our guide to clearing and settlement in Turkey.

Market abuse rules for the carbon market

A separate regime. Market abuse in the ETS market is addressed through a separate regime under the Climate Law and EPDK rules. The Climate Law gives EPDK the task of setting the rules on surveillance and supervision of market-disrupting behaviour in the ETS market, after obtaining SPK’s opinion (Art. 10(1)(ç)). EPİAŞ must report market-disrupting behaviour to the Climate Change Presidency and EPDK (Art. 10(1)(d)). The market regulation provides that EPİAŞ fulfils its obligations on market-disrupting behaviour under EPDK’s Regulation on Transparency and Market-Disrupting Behaviour in Energy and Environmental Markets (ETS Market Regulation Art. 51).

The EPDK regulation. That regulation was published in the Official Gazette of 14 February 2026. An amendment published on 23 May 2026 moved its entry into force to 1 January 2027 (Art. 16(1)). It covers the ETS market and the organised renewable energy guarantee market, together with bilateral agreements in those markets. Exchange-traded derivatives on Borsa İstanbul and bilateral contracts with end consumers are outside its scope (Art. 2). Its main rules are as follows:

1. 1. Inside information is information about energy or environmental products that has not been made public and would be likely to affect their prices significantly if disclosed (Art. 4(1)(c)).
2. 2. Market participants must disclose inside information without delay, completely and accurately, on the designated platform. Delayed disclosure is permitted only under the stated conditions and must be reported (Art. 7).
3. 3. Trading on inside information, disclosing it outside the normal course of duties, and recommending trades on its basis are prohibited (Art. 8).
4. 4. Giving false or misleading signals about supply, demand or price, setting prices at artificial levels, and spreading misleading information are market manipulation (Art. 9).
5. 5. Market operators must report suspicious situations to EPDK without delay (Art. 11(3)).
6. 6. Breaches are sanctioned with administrative fines under Electricity Market Law No. 6446 (Art. 13).

This summary of the EPDK regulation is based on the text as published and should be checked against the Official Gazette before reliance. For listed companies, the Capital Markets Law rules on market manipulation and inside information continue to apply to their shares and other capital market instruments. These are explained in our guides to market manipulation under Turkish law and market-disrupting acts under Article 104.

Carbon credits and offsetting

Offsetting part of the surrender obligation with an equivalent amount of carbon credits may be permitted (Climate Law Art. 11(1)). A carbon credit is a credit expressed in tonnes of CO2 equivalent that results from validation and verification of an emission reduction or removal activity by independent bodies and certification by a standard-setting body (Art. 2(1)(ö)). The Carbon Market Board decides to what extent offsetting may be used in the ETS (Art. 10(1)(a)). The Climate Change Presidency sets the principles of a national carbon crediting and offsetting system (Art. 11(2)).

If information, documents or data submitted for offsetting projects are found to be erroneous or fraudulent, the offset cannot be used for surrender. The surrender obligation is then treated as unfulfilled and the sanction for non-surrender applies to the project owner (Art. 11(3)). Owners of domestic projects that have started, or will start, producing carbon credits under national or international standards in voluntary markets must register them in the carbon credit registry within the period set by the Presidency (Art. 11(5)). The fine for failing to register applies once the registry is established and the period is announced (Art. 14(5); Provisional Art. 1(3)).

Sustainability reporting and assurance

TSRS. The Public Oversight, Accounting and Auditing Standards Authority (KGK) published the Turkish Sustainability Reporting Standards TSRS 1 (general requirements) and TSRS 2 (climate-related disclosures) in the Official Gazette of 29 December 2023. Entities within the scope set by KGK have been required to prepare sustainability reports from 1 January 2024. KGK’s scope decisions identify categories of entities and apply size criteria based on total assets, net sales and number of employees. Under the decision published on 16 January 2026, the size test is met where an entity satisfies at least two of the three criteria in two consecutive reporting periods. A KGK decision published on 22 October 2026 extended to all entities, for 2026 reporting periods, the relief allowing sustainability reports to be published after the financial statements. It limited the relief for reporting only climate-related information to entities that had already used it. Whether a particular company is within scope should be checked against its own disclosures and the KGK decisions.

Assurance. The Sustainability Audit Regulation governs assurance of sustainability reports required by the Commercial Code, KHK No. 660 and other legislation, or obtained voluntarily (Arts. 2 and 6). The purpose of the audit is to give users an opinion providing assurance on whether the subject matter complies with the relevant criteria, including the TSRS (Art. 5(1)). For sustainability-related risks and opportunities, the TSRS are the criteria (Art. 8(1)). Only audit firms authorised in the sustainability field may carry out these audits (Art. 11). Unless special rules apply, the report is delivered to the company’s management at least 20 days before the ordinary general meeting for the relevant financial year (Art. 20(2)).

Auditors’ liability. Audit firms and auditors are each liable for loss arising from sustainability audit reports that breach the auditing standards, or whose information and opinions are false, incomplete or misleading (Sustainability Audit Regulation Art. 30(1)). This sits alongside the general liability of auditors under Commercial Code Art. 554 and Capital Markets Law Art. 63, explained in our guide to suing directors and auditors of Turkish listed companies.

SPK’s sustainability principles. Listed companies must state in their annual reports whether they apply SPK’s sustainability principles and, if not, give reasons and explain the effects on environmental and social risk management. Applying the principles themselves is voluntary (Communiqué II-17.1 Art. 8(1) and (3)). The corporate governance framework is explained in our guide to corporate governance in Turkish listed companies.

Disclosure duties and liability of listed companies

For a listed company in a covered sector, the following can be significant: the allocation of free allowances, the cost of buying allowances, sanctions for non-surrender, blocking of registry accounts and cancellation of an emission permit. Where such information is inside information, the continuous disclosure rules under Communiqué II-15.1 apply. These are explained in our guide to continuous disclosure in Turkey.

False or misleading information intended to affect the prices or values of capital market instruments or investors’ decisions is an offence under the Capital Markets Law (Art. 107(2)). Inaccurate financial statements and reports can give rise to civil liability of the issuer, its directors and its auditors. These rules apply to statements about carbon costs, emission performance and climate targets in the same way as to any other information. How such claims are built is explained in our guide to financial reporting fraud and audit failures.

Points for foreign institutional investors

Map exposure. Identify portfolio companies with installations above the 50,000-tonne threshold, the activities listed in Annex 1 to the ETS Regulation and any exemptions that apply to them.

Read disclosures together. Compare financial statements, sustainability reports under the TSRS, sustainability audit reports and corporate governance and sustainability compliance statements. Inconsistencies between them are a reason for engagement and, where losses result, a potential basis for claims.

Use general meeting rights. The sustainability audit report is delivered to management before the general meeting (Sustainability Audit Regulation Art. 20(2)). The general meeting is the place to ask questions about carbon costs and climate disclosures. Voting from abroad is explained in our guide to voting at Turkish general meetings from abroad.

Frequently asked questions

Does Turkey have an emissions trading system?

Yes. Climate Law No. 7552 established its legal basis, and the ETS Regulation and the ETS Market Regulation were published in August and October 2026. The system starts with a pilot period (Climate Law Provisional Art. 1).

Which installations are covered?

Installations carrying out Annex 1 activities with conservatively calculated annual emissions above 50,000 tonnes of CO2 equivalent, subject to exemptions (ETS Regulation Arts. 4 and 5).

Who operates the carbon market?

EPİAŞ, which also acts as central counterparty in the primary and secondary markets (Climate Law Art. 9(2); ETS Market Regulation Art. 5(5)).

Can foreign investors trade Turkish allowances?

Not under the current regulations. Market participants are the covered operators that have signed the registry participation agreement (ETS Market Regulation Art. 3(1)(aa)).

When must allowances be surrendered?

By the last business day of November of the obligation year (ETS Regulation Art. 16(1)).

What is the penalty for not surrendering allowances?

A fine for each missing allowance equal to twice the higher of the average primary and secondary market prices for the last three months of the year, and the shortfall is added to next year’s obligation (Climate Law Arts. 9(5) and 14(4)(c)).

Does insolvency end the surrender obligation?

No. Ceasing operations, liquidation or a concordat do not prevent its performance (Climate Law Art. 9(10)).

Can allowances be pledged as collateral?

No. Allowances cannot be the subject of collateral agreements (Climate Law Art. 9(9)).

Who regulates market abuse in the carbon market?

EPDK, after obtaining SPK’s opinion, under its regulation on transparency and market-disrupting behaviour, which enters into force on 1 January 2027 (Climate Law Art. 10(1)(ç)).

Does the Capital Markets Law apply to allowance trading?

The ETS market has its own regime under EPDK. The Capital Markets Law continues to govern listed companies’ shares and their disclosures.

Can carbon credits be used in the ETS?

Offsetting may be permitted to the extent decided by the Carbon Market Board. Offsets based on erroneous or fraudulent data are disallowed (Climate Law Arts. 10(1)(a) and 11).

Must Turkish companies publish sustainability reports?

Entities within KGK’s scope must apply TSRS 1 and TSRS 2. Scope is based on entity categories and size criteria set by KGK decisions.

Are sustainability reports audited?

Where required or voluntarily, by audit firms authorised in the sustainability field, against criteria including the TSRS (Sustainability Audit Regulation Arts. 5, 8 and 11).

Can investors claim against sustainability auditors?

Audit firms and auditors are each liable for loss caused by reports that breach standards or contain false, incomplete or misleading information (Sustainability Audit Regulation Art. 30(1)).

Must listed companies follow SPK’s sustainability principles?

Applying them is voluntary, but annual reports must state whether they are applied and explain any departures (Communiqué II-17.1 Art. 8).

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