A Preliminary Analysis of the Turkish Emissions Trading System

In this February 2024 IPC–Mercator analysis, Ahmet Atıl Aşıcı offers a pre-assessment of Turkey’s planned Emissions Trading System (ETS), expected to launch in 2025, drawing lessons from the EU ETS on design pitfalls: Turkey’s Monitoring-Reporting-Verification (MRV) framework established in 2015 covered 476 installations in 2020 and tracked 251 MtCO2e—48.2% of national emissions—yet the announced pilot design focusing only on “Category C” sites emitting >500 ktCO2e annually may leave key activities (e.g., gypsum, glass, mineral wool, iron) outside the system, motivating a shift toward EU-style activity-specific coverage thresholds. The analysis warns that setting an increasing cap aligned with Turkey’s 2023 NDC could create allowance surpluses, depress carbon prices, and generate windfall profits (as seen in early EU ETS phases), arguing instead for a binding, tightening cap consistent with climate goals; using Climate Action Tracker benchmarks, it highlights the gap between Turkey’s NDC level for 2030 (695 MtCO2e) and a “fair” 1.5°C-compatible level (433.9 MtCO2e), and derives much lower implied caps for ETS-covered Category C emissions (about 191.8 MtCO2e in 2030 and 157 MtCO2e in 2038). It also notes that overlapping policies—such as fossil-fuel subsidies and tax advantages—could undercut ETS effectiveness unless addressed.

Introduction 

According to the draft carbon market regulation1 announced in November 2023, the Turkish Emissions Trading System (ETS) will begin in 2025. The first step in establishing an ETS in Türkiye began with the establishment of a Monitoring-Reporting-Verification (MRV) system in 2015. According to the ETS regulation, installations in the electricity, refinery, non-metallic minerals, basic metals, paper, and the chemicals sectors emitting above a certain level of greenhouse gases (GHGs) (> 500 ktCO2e) will be covered under the new system. As of 2020, 476 installations under the Turkish MRV system emitted 251 MtCO2e of GHG, which corresponds to 48.2% of total emissions (520 MtCO2e).2 This policy brief aims to highlight possible shortcomings in the Turkish ETS by reviewing the experiences of existing ETS practices globally, specifically of the EU ETS, which shares many common elements with that of Türkiye

Concluding Remarks 

ETS is gaining ground worldwide as an effective method to limit GHGs. As of 2023, there are 36 implemented, 22 under consideration, and three scheduled ETS initiatives worldwide. Türkiye is one of the countries considering a domestic ETS, to be effective in 2025. Türkiye’s efforts to establish an ETS started in 2015 by instituting a MRV system that covered installations in electricity, refinery products, non-metallic minerals, iron-steel, aluminum, paper, and chemicals, almost the same coverage as the EU ETS, except aviation. The scope of the installations, however, is rather limited due to the criterion announced to be employed. According to officials, only Category C installations emitting more than 500 ktCO2/ year will be included under the Turkish ETS. However, historical MRV data reveals that if this is the case, then no installations producing plaster, glass, mineral wool, and iron would be covered. Applying the EU ETS installation selection criteria, which is specifically designed for each activity, may solve this problem. Another important issue is the size of the cap. The EU ETS experience reveals that effective carbon prices are formed only when allowances are scarce. In other words, the oversupply of allowances would drive down carbon prices to zero and render the ETS ineffective.