Principles Governing The Operation Of The Turkish Emissions Trading System Market Established | Legal 500

Principles Governing The Operation Of The Turkish Emissions Trading System Market Established

Ozbilen Aykut Attorneyship

The Regulation on the Operation of the Turkish Emissions Trading System Market (“Regulation”), published in the Official Gazette dated 21.10.2026 and numbered 33407, establishes the procedures and principles governing the operation of the Turkish Emissions Trading System (“ETS”) market, which is to be established to encourage the reduction of greenhouse gas emissions, including the trading of emission allowances, market participation requirements and the Transaction Registry System.

Gülbin Murat

The Regulation on the Operation of the Turkish Emissions Trading System Market (“ Regulation”), published in the Official Gazette dated 21.10.2026 and numbered 33407, establishes the procedures and principles governing the operation of the Turkish Emissions Trading System (“ ETS”) market, which is to be established to encourage the reduction of greenhouse gas emissions, including the trading of emission allowances, market participation requirements and the Transaction Registry System.

Prepared pursuant to Electricity Market Law No. 6446 and Climate Law No. 7552, the Regulation establishes the legal and operational framework for the markets through which businesses covered by the ETS may acquire and trade emission allowances.

Structure and Operation of the Emissions Trading System Market

The Emissions Trading System (ETS) is a market-based mechanism designed to encourage the reduction of greenhouse gas emissions by imposing an overall cap on greenhouse gas emissions from facilities operating in certain sectors and allowing emission allowances to be traded. Under this system, companies that reduce their emissions may obtain an economic benefit by selling their unused allowances, while companies whose emissions exceed their available allowances incur additional costs to acquire further allowances. Each allowance represents the right to emit 1 tonne of carbon dioxide equivalent of greenhouse gases.

Under the Regulation, the ETS market consists of primary and secondary markets.

- In the primary market, emission allowances will be offered to businesses covered by the ETS through auctions. - In the secondary markets, allowances acquired through auctions or free allocation may be traded between market participants. The secondary markets will comprise the spot allowance market and, if established, the futures allowance market.

The operation of the markets, execution of allowance transactions and management of settlement processes will be carried out by Enerji Piyasaları İşletme Anonim Şirketi (“ EPİAŞ”), the Turkish energy exchange operator.

Transactions in the primary and secondary markets will be conducted through the ETS Market Management System (“ ETSPYS”). Allowance trading agreements concluded between market participants under private law must also be notified to EPİAŞ.

Market Participation and Registration Requirements

Under the Regulation, businesses subject to the ETS are required to open an account in the Transaction Registry System (“İKS”) in order to carry out allowance transactions.

The İKS is the system through which the issuance, holding, transfer, cancellation and surrender of allowances for the fulfilment of emission obligations are electronically recorded and monitored on a facility-by-facility basis.

To open an account in the İKS, businesses must sign a participant agreement with the central settlement institution, submit an application to EPİAŞ through ETSPYS and execute an İKS participation agreement.

Applications will be reviewed by EPİAŞ within 10 business days. Where deficiencies are identified, businesses will be granted 10 business days to remedy them. If the deficiencies are not remedied within the prescribed period, registration will not be completed and a new application will be required.

Completion of İKS registration does not automatically authorise businesses to trade directly in the primary or spot allowance markets. To participate in the relevant market, businesses must separately execute a primary market or spot allowance market participation agreement with EPİAŞ.

Principles Governing the Allocation and Trading of Allowances

The Regulation establishes the rules governing the allocation of emission allowances through auctions and their trading in secondary markets.

In the primary market, allowances will be offered for sale by EPİAŞ in accordance with the auction schedule determined by the Directorate of Climate Change. The auction schedule will be announced within 15 business days following publication of the National Allocation Plan.

The minimum bid size at auctions is set at 1 lot, equivalent to 100 allowances. Bid prices must be submitted in Turkish lira per tonne of carbon dioxide equivalent, in increments of TRY 0.50.

Allowances designated for free allocation under ETS legislation will be transferred to the facility accounts of the relevant businesses. These allowances may be transferred between facilities belonging to the same business or sold in secondary markets and under bilateral allowance trading agreements.

Trading in the spot allowance market will be conducted through a continuous trading mechanism, with trading sessions held on at least 4 business days per month between 10:00 and 15:00. Trading days and hours may be adjusted according to market needs, subject to the notification requirements prescribed under the Regulation.

Collateral, Settlement and Financial Obligations

The Regulation also establishes the principles governing collateral and settlement processes to ensure the financial security of allowance trading transactions.

Market participants are required to provide the necessary collateral for transactions conducted in the primary and spot allowance markets. Participants may not submit purchase bids