The Climate Law No. 7552 (“Climate Law”), which introduces a new framework for Emission Trading System (“ETS”) and green taxonomy in Türkiye, entered into force upon its publication in the Official Gazette on July 9, 2025. The law aims to reduce greenhouse gas emissions and accelerate the green transition by establishing the legal basis for (i) climate finance, (ii) incentives for combating climate change, and (iii) Türkiye’s green taxonomy which will identify green investments.

The main features of the Climate Law are as follows:

• The law incorporates definitions such as “Fair Transition”, “Primary Market”, “Offsetting”, “Emission Trading System (ETS)”, “Embedded Greenhouse Gas Emissions” and “Voluntary Carbon Markets” forming the legal basis for upcoming implementation and enforcement actions.

• Fair Transition refers to policies and practices that address climate change and support green growth by ensuring inclusive participation particularly including vulnerable groups such as children, people with disabilities while managing employment impacts through proper measures and creating new job opportunities, maximizing economic, environmental, and social benefits.

• Under the Climate Law, Türkiye’s green taxonomy will be created to classify climate-friendly economic activities. This system will support the flow of climate finance by identifying investments aligned with Türkiye’s environmental goals.

• Türkiye will implement ETS mechanism, which refers to the primary and secondary markets, organized, operated, and regularly maintained by the market operator, where the trading of allowances and/or other standardized contracts deemed appropriate for emission trading takes place. The designated market operator is Energy Exchange İstanbul (“EPİAŞ”).

• Primary market refers to the market in which transactions are conducted to ensure the distribution of allocations to market participants by auction method, and secondary market refers to the markets in which the allowances are traded after their distribution and/or sale in the primary market,

• Through the Climate Law, the Carbon Market Board (“Board”) will be established. The Board will be responsible for approving the national allocation plan, determining the distribution of free allowances within the ETS, and setting the volume of allowances to be offered in the primary market. It also decides the proportion of offsetting transactions permitted under the ETS and establishes the overarching plans, policies, strategies, and actions for the system’s operation. In addition, the Board will identify the sectors, projects, and activities eligible for participation in international carbon markets and sets the related restrictions, as well as the core policy framework for imports and exports.

• The ETS will primarily be implemented through a pilot phase before being fully integrated. The scope, duration, and procedures of the pilot phase will be determined by the Board in consultation with relevant institutions. During this pilot period there will be an 80% discount on the penalties applied under the Climate Law.

• National strategies and action plans will be prepared and updated periodically by the Republic of Turkey Ministry of Environment, Urbanization and Climate Change Directorate of Climate Change (“Directorate”) to achieve net-zero emissions. Local climate action plans must be completed by December 31, 2027, with a possible one-year extension granted by presidential decree.

• The Climate Law sets out the duties and responsibilities of the Directorate. The Directorate will be responsible for ensuring inter-institutional coordination, defining activities, and establishing relevant standards. It will also monitor progress in greenhouse gas emission reduction and climate change adaptation efforts. Additionally, the Directorate is authorized to regulate market-based mechanisms related to carbon pricing.

• Businesses falling within the scope of the ETS will be required to obtain a greenhouse gas emission permit within three years from the effective date of the law. During this three-year period, businesses will be deemed to hold a one-time greenhouse gas emission permit in order to continue their activities under the ETS. If deemed necessary, the Directorate, upon the decision of the Board, is authorized to extend this period by up to two years from its expiry date.

• Each year, ETS participants will be required to allocate emission allowances equivalent to their verified annual greenhouse gas emissions. If a business fails to meet this obligation, the following year it will be required to allocate not only the allowances but also an additional amount of allowances equal to the greenhouse gas emissions subject to the penalty specified under Article 14(4)(c) of the Climate Law.

• Additionally, under the law, if businesses are unable to allocate the necessary allowances for the ETS mechanism, they may use carbon credits of an equivalent amount, subject to the conditions set by the national carbon crediting and offsetting system. The principles of the national carbon crediting and offsetting system, through which carbon credits generated via greenhouse gas reduction, removal activities, or enhancement of carbon sinks can be used for offsetting under the ETS and voluntary commitments, will be determined by the Ministry of Environment, Urbanization and Climate Change.

• If allowances are not allocated within the relevant payment period, an administrative fine equal to twice the higher of the weighted average primary or secondary market allowance price for the final three months of the relevant year will be imposed for each missing allowance. Businesses that fail to fulfil at least 80% of their annual allocation obligations for three consecutive years will have their emission permits revoked. Delays or irregularities in greenhouse gas reporting may result in fines of up to TRY 5 million. The use, import, trade, or market placement of ozone-depleting substances will be subject to fines of up to TRY 2.5 million.

• The Climate Law also foresees several administrative fines in case of non-compliance for both legal entities and real persons. In the event of market manipulation or disruptive practices in the ETS market operated by EPİAŞ, administrative fines of up to TRY 2 million for individuals and TRY 20 million for legal entities may be imposed, depending on the severity of the violation. If any financial gain is obtained or damage is caused, the fine will be at least twice the value of the benefit gained or loss caused.

The Climate Law is set to reshape Türkiye’s environmental and business landscape, particularly impacting sectors with high carbon emissions. Companies should closely monitor forthcoming secondary legislation and prepare to ensure compliance with the new regulatory framework.

This information is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This should not be acted upon in any specific situation without appropriate legal advice. This information is protected by copyright and may not be reproduced or translated without the prior written permission of Ergün Avukatlık Bürosu.