Turkey’s plans to launch its domestic compliance carbon market are on track, with a pilot phase set to start in early 2025, a senior official from the country’s Directorate of Climate Change said Dec. 3.
Speaking at S&P Global Commodity Insight’s Global Carbon Markets Conference in Barcelona, Huseyin Ayaz, who specializes in carbon pricing for the Turkish government, said the establishment of the country’s emissions trading system is moving in the right direction.
“We have completed all the preparation of the drafting process of the ETS, and we are waiting for its assent by the parliament,” said Ayaz, adding that some elements still need to be clarified and updated.
The pilot phase is scheduled to start at the beginning of next year, while the first implementation phase is set to run from 2027 to 2034.
Turkey’s ETS is expected to be similar to the EU Emissions Trading System — where CO2 emissions from regulated sectors have fallen by almost 40% since 2005, when the EU ETS was launched — while also raising billions of euros in revenue from government auctions of carbon allowances.
Turkey’s industrial sectors — refining, metals, chemicals and cement — can be very carbon intensive, and analysts expect the Turkish ETS to have a similar effect as the EU’s carbon market, boosting the uptake of renewable energy and reducing demand for coal and oil-fired electricity generation, while encouraging cleaner technologies across emitting industries.
Currently, the draft ETS regulation mentions that allocated allowances will be distributed to obligated operators within the scope of the ETS through an auction method. These allocations can then be traded in the secondary market, which will be overseen by Turkey’s largest energy exchange EPIAS.
Reality of CBAM
Ayaz also acknowledged that the impact of EU’s carbon border adjustment mechanism on the Turkey’s industrial sector will be felt, and having a domestic carbon market will help it manage this risk.
“We know that CBAM is reality for us. We are a candidate country for CBAM as our companies have a huge amount of trade with the EU,” he added.
With the EU’s CBAM set to come into its definitive phase from 2026, Turkish exporters face higher costs, as nearly half of all exports go to the EU.
The EU mechanism imposes a carbon tariff on emission-intensive commodities imported by the EU, including aluminum, cement, electricity, fertilizers, hydrogen, iron and steel. The aim is to level the playing field for EU companies, as most exporting countries do not have a carbon price as high as EU ETS, or do not have a price on emissions at all.
Carbon-pricing programs like the EU ETS are considered an effective and economic way to reduce greenhouse gas emissions. As of mid-2024, there were 75 carbon taxes or emissions trading systems in operation, according to the World Bank.
Carbon prices currently vary significantly on a country-to-country basis as there is no global carbon price. Carbon permits under the EU ETS are around five times more expensive than compliance prices in China, the industrial powerhouse of the world.
Platts, part of S&P Global Commodity Insights, assessed EU Allowances for December 2024 at Eur68.73/mtCO2e ($72.35/mtCO2e) Dec. 2. This compared with China’s compliance emissions price, which was valued at Yuan 102.38 mtCO2e ($14.24/mtCO2e) on Nov. 29, according to the Shanghai Environment and Energy Exchange.
