Turkey has adopted rules and procedures for the functioning of the pilot phase of its emissions trading system (ETS), which will be implemented in 2026-27.
While obligated companies will only be subject to monitoring, reporting and verification (MRV) in 2026, the first compliance obligation will only arise for 2027 emissions, with the deadline for surrendering allowances equivalent to verified emissions set to be the last working day of November 2028.
Free allocation will be set at 100pc for 2027, and the rules also confirm that banks and other financial institutions will not be allowed to participate in the pilot phase. Offsetting through carbon credits may only be allowed if specifically approved by the Carbon Market Board (CMB), according to the rules. This came as a surprise to market participants, as authorities have in the past indicated there will be no offsetting during the pilot phase.
Allowances issued during the pilot can only be used for pilot obligations, and not be carried to the final phase. Any unmet pilot phase obligations will be carried forward into obligations under the first full implementation period.
Benchmark values — which will determine free allocations for each category — will be set differently for power and non-power sectors. Power benchmarks will be calculated using five-year weighted-average emissions intensity — 2023-27 for the pilot phase. Benchmarks will be determined separately for each power plant, through a CMB decision.
Industrial benchmarks, on the other hand, will rely on current-year sector-wide emission intensities. The directorate for climate change under the ministry will establish and publish benchmarks for each sub-installation for industrial firms.
Benchmarks will be published through the national allocation plan, after verification reports are submitted. Obligated firms in the pilot phase must submit initial monitoring methodology plans by the end of October, according to the recently adopted ETS implementing act.
The deadline to submit verified data for 2026 emissions is set on 30 April 2027 and for 2027 emissions on 30 April 2028. Power generators must submit historical emissions intensity data for 2023-25 by 30 June.
The pilot phase is limited to five sectors which are also subject to the EU's carbon border adjustment mechanism (CBAM) — namely, electricity, cement, iron and steel, aluminium and fertilisers. Installations emitting 50,000t of CO2 equivalent or above must participate.
The CMB can amend the pilot phase's scope, duration or implementation rules, according to the adopted text.
It also confirmed that Turkey's first formal ETS compliance period will run during 2028-35, split into the 2028-30 and 2031-35 sub-periods.
