A New Era In Türkiye's Green Transition: Draft Regulation On The Operation Of The ETS Market Has Been Published!

I. INTRODUCTION

With the enactment of the Climate Law No. 7552, the legal foundation for a market mechanism based on emission trading has been established in Türkiye. On 23/10/2025, the Energy Market Regulatory Authority of the Republic of Türkiye (the “EMRA”), acting under the Electricity Market Law No. 6446, published for public consultation the Draft Regulation on the Operation of the Emission Trading System Market (the “Draft Regulation”). The Draft Regulation sets out the procedures and principles for establishing and operating the Emission Trading System (the “ETS”) market and the Transaction Registry System (the “TRS”), which aims to encourage the reduction of greenhouse gas emissions. To achieve this purpose, the Draft Regulation outlines the ETS framework in which allowances, defined as fungible, transferable, dematerialized rights representing the authorization to emit one ton of carbon dioxide equivalent of greenhouse gases within a specified period, are allocated, purchased, and sold (the “Allowance”).

Accordingly, Türkiye is establishing the institutional and legal foundations of a framework parallel to the European Union Emission Trading System, which was introduced by Directive 2003/87/EC and has evolved over time, particularly through the Carbon Border Adjustment Mechanism (the “CBAM”), thereby defining its scope and influence more clearly. In this regard, interested parties will be able to share their opinions and suggestions regarding the Draft Regulation with EMRA by the end of the business day on 13/11/2025.

II. FUNDAMENTAL PRINCIPLES

1. What Are the Market Types?
Under the Draft Regulation, the markets within the scope of the ETS are divided into two types: the primary market and the secondary market. In these markets, purchase and sale of Allowances and/or other standardized contracts deemed appropriate for emission trading are carried out.

In the primary market, Allowances are distributed among market participants through auctioning. The secondary markets are the markets where the purchase and sale transactions of Allowances that have been freely allocated and/or sold in the primary market are carried out. The secondary markets consist of the spot Allowance market and the futures Allowance market.

2. Who Is the Market Operator?

The primary and secondary ETS markets are organized and operated by Enerji Piyasaları İşletme Anonim Şirketi (the “Market Operator” or “EPİAŞ”). In these markets, EPİAŞ acts as the central counterparty, assuming the role of seller to buyers and buyer to sellers.

In addition, the Market Operator carries out settlement management; accrual, collection, and payment of invoices arising from settlement results; data publication activities; and the operation of the TRS. These functions are performed on an equal basis, without discrimination between parties, and in line with the principles of transparency and accountability.

3. Who Falls Within the Scope of the Draft Regulation?

Persons who complete the participation procedures set out in the Draft Regulation may become market participants (the “Market Participant”). For this purpose, the relevant entities are the operators covered by the ETS. An operator refers to the responsible natural or legal persons, as well as public institutions and organizations, that carry out the activities listed in Annex-1 of the Draft Türkiye Emissions Trading System Regulation, published on 22/07/2025 on the website of the Ministry of Environment, Urbanization and Climate Change, Climate Change Presidency (the “Presidency”), or that operate and have the right to use the relevant installation (the “Operator”).

To obtain “Market Participant” status, Operators must execute a TRS participation agreement with the Market Operator. Opening an account in the TRS is mandatory under the ETS. Application and registration processes are completed through the ETS Market Management System.

4. What Are the Principles Governing Supply in the Primary Market?

The quantity of Allowances offered for sale through auctions will be determined annually by the Presidency, in accordance with the auction schedule to be published by the Presidency, and will be distributed equally among the auctions to be held throughout the year. The primary market will be operated by the Market Operator.

As stated in our article “Roadmap for Green Transition: Draft Regulation on Emission Trading System Has Been Published” (the “Article”) (You can access the full text of the Article via this  link.), in previous auctions each 1 lot purchase bid corresponded to 500 Allowances. Under the Draft Regulation, the minimum bid size has been maintained at 1 lot, while each 1 lot purchase bid in the primary market will now correspond to 100 Allowances. Each Allowance represents the right to emit 1 ton of carbon dioxide equivalent of greenhouse gases. Prices in the bids will be quoted in Turkish lira per tCO₂e, in multiples of TRY 1.

In auctions conducted under these principles, the Market Operator acts as the “sole seller,” while Market Participants are only permitted to submit buy bids.

5. How Is the Auction Schedule Determined?

The auction schedule includes the auction date, the start and end times of the sessions during which bids will be submitted, the quantity of Allowances to be auctioned, and other relevant details.

Within 15 (fifteen) business days following the publication of the National Allocation Plan, the auction schedule will be published by the Presidency. If the total bids submitted are less than the number of Allowances offered for auction, the auction will be cancelled, and the cancelled Allowances will be equally distributed among the remaining auctions scheduled for the same system year. If the last auction of the year is cancelled, it may be repeated under the same conditions up to two times within 15 (fifteen) business days. If the second repetition is also cancelled, the relevant Allowances will be auctioned in the following system year.

6. What Are the Principles Governing Transactions in the Secondary Market?

The secondary markets operate through a continuous trading mechanism in which Market Participants may carry out buy and/or sell transactions based on the Allowances held in their TRS accounts. Unlike the primary market, participants in the secondary market may submit both buy and sell orders.

• In the spot Allowance market, contracts are opened for trading by the Market Operator, and upon price matching, the parties assume the obligation to deliver or receive the corresponding quantity of Allowances. Market Participants may submit sell orders up to the total quantity of Allowances eligible for trading in their TRS accounts combined with the quantity purchased within the same trading session. The minimum bid size for purchase or sale orders in these markets has been set at 1 lot. As stated in our Article, each 1 lot order previously corresponded to 1,000 Allowances, whereas under the Draft Regulation, each 1 lot now corresponds to 100 Allowances. Each Allowance represents the right to emit 1 ton of carbon dioxide equivalent (tCO₂e) of greenhouse gases. Prices are quoted in TRY per tCO₂e in multiples of TRY 0.50, and quantities are specified in terms of the number of Allowances per lot.
• The futures Allowance market will be established and operated in accordance with the procedures and principles to be determined by the EMRA, considering the opinion of the Presidency.

7. Why Does a Market Participant Provide Collateral?

The Draft Regulation introduces a requirement for Market Participants to provide collateral in order to ensure financial stability in the emissions trading market and minimize collection risks. Collateral serves to:

• ensure the continuity of cash flow among participants when a Market Participant fails to meet market-related obligations or cannot perform its activities,
• secure the creditor Market Participant if a participant does not make payments on time.

Participants with insufficient collateral cannot submit bids in the relevant market session.

III. CONCLUSION

As the financial implications of the Carbon Border Adjustment Mechanism (the “CBAM”), which envisages a transitional period until 31/12/2025 and will fully enter into force on 1/1/2026, draw nearer and are expected to significantly affect Türkiye's export-oriented economy, the step taken by Türkiye to establish an ETS under the Green Deal Action Plan is of critical importance.

The full text of the Draft Regulation can be accessed  here.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.