On July 9, 2025, Turkey published the much-anticipated Climate Law No. 7552, marking a significant milestone in the country's environmental policy and business landscape. Aiming for net-zero emissions and green growth, the law introduces transformative regulations impacting both local companies and foreign investors operating in Turkey.
Establishment of the Emission Trading System (ETS)
A key component of the Climate Law is the establishment of a national Emission Trading System (ETS). Companies engaged in activities generating direct greenhouse gas emissions must now obtain emission permits from the newly formed Climate Change Authority. These permits, known as allowances, will be distributed either free of charge or via auction.
Businesses failing to comply with allowance limits will face substantial financial penalties, calculated based on prevailing ETS market rates. Consequently, sectors such as energy, manufacturing, and transportation will need to strategically realign their operational models to mitigate compliance risks and costs.
Introduction of a Border Carbon Adjustment Mechanism
Echoing the EU's Carbon Border Adjustment Mechanism (CBAM), Turkey's new law also provides for the potential implementation of a similar mechanism known as the Border Carbon Adjustment Mechanism (BCAM). This mechanism targets imported goods, assessing their carbon footprint and potentially imposing additional tariffs or fees.
This development presents significant implications for import-dependent businesses and international trade partners, requiring careful monitoring and proactive adjustment of supply chain strategies.
Promotion of Carbon Credit Markets and Offset Mechanisms
The law establishes comprehensive regulations around carbon credits, allowing companies to partially meet their ETS obligations through carbon offsets. Investments in renewable energy projects, carbon sequestration initiatives, and energy efficiency improvements could thus offer substantial economic incentives.
Firms positioned to develop, certify, or trade carbon credits are expected to experience growth opportunities, attracting both local and international investments into green projects within Turkey.
Strategic Financial Incentives for Green Investments
To facilitate Turkey's green transition, the law outlines robust financial support mechanisms. It promotes the development of green financial products, such as sustainable bonds and green loans, while also incentivizing insurance instruments and investment guarantees.
Companies that engage in environmentally sustainable projects, particularly in sectors prioritized by Turkey's national strategy, will benefit from reduced financing costs and additional public funding opportunities.
Mandatory Reporting and Transparency Measures
The Climate Law introduces rigorous reporting requirements for businesses, mandating transparent disclosure of carbon footprints and verified emission reports. Public access to these disclosures will enhance transparency and corporate accountability, compelling businesses to adopt sustainable operational practices actively.
Stringent Enforcement and Penalties
Non-compliance with ETS requirements or reporting obligations will attract severe financial penalties ranging from TRY 500,000 to TRY 50 million. Penalties escalate significantly with repeated violations, underscoring the urgency for businesses to ensure robust compliance mechanisms.
Implications for Foreign Investors
Foreign investors operating or planning to enter the Turkish market must be mindful of the extensive impact of these regulatory changes. The introduction of BCAM and ETS necessitates strategic adaptation in investment planning, risk assessment, and operational compliance.
These new regulations reinforce Turkey's commitment to environmental sustainability while positioning the country as an attractive destination for ESG-focused investors and sustainable finance.
Legal Perspective on the Climate Law – Insights from CCS Law
The enactment of Turkey's Climate Law introduces a new layer of complexity for companies subject to environmental obligations and emissions regulation. Legal developments surrounding emissions trading systems, carbon credit mechanisms, and green finance instruments are expected to play an increasingly prominent role in business planning and risk management.
At CCS Law, the evolving regulatory framework is monitored with particular attention to its implications for corporate compliance, investment structuring, and operational practices. The firm's multidisciplinary understanding of climate-related legal instruments contributes to ongoing discussions within the legal and business communities navigating these developments.
As regulatory expectations grow more detailed, legal interpretation and strategic awareness will remain critical in responding to the demands of Turkey's green transition.
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