The Draft Regulation on the Turkish Emissions Trading System ("TR-ETS"), published by the Ministry of Environment, Urbanization and Climate Change for public consultation, constitutes the foundation of the secondary legislation for the implementation of the Climate Law No. 7552. The Draft comprehensively sets out the procedures and principles governing the monitoring, reporting, and verification of greenhouse gas emissions, as well as the allocation of emission allowances and the fulfillment of emission obligations by undertakings through a market-based mechanism. In this respect, TR-ETS carries significant implications not only in terms of environmental law, but also from the perspective of corporate law, giving rise to numerous structural and operational consequences.
Pursuant to the Draft Regulation, facilities exceeding a specified threshold of greenhouse gas emissions are brought within the scope of the system, and their continued operation is made conditional upon obtaining a greenhouse gas emission permit. Such permits are valid for a fixed term and must be updated in the event of any changes to the relevant activity. This requirement effectively classifies emission permits as rights akin to licenses, the legal status and continuity of which must be evaluated in advance, particularly in the context of structural transactions such as mergers, demergers, and asset transfers.
Moreover, the emission allowances allocated under TR-ETS will qualify as financial assets for companies and may acquire economic value due to their transferability. Accordingly, all dispositions over these allowances should be expressly regulated in board resolutions, signature authorities, and internal company policies. In cases where group companies operate shared facilities, ownership and liability over such allowances must be clearly determined under the applicable intra-group legal arrangements.
The Draft Regulation also mandates that companies submit annually verified emission and activity level reports through an electronic system. Failure to comply with this obligation may result in significant administrative monetary penalties, and the detection of such non-compliance may give rise to the legal liability of the company's governing bodies. Therefore, it is imperative for companies to establish internal systems for reporting, verification, and electronic notifications, to identify responsible personnel, and to implement robust internal control mechanisms.
Furthermore, the Draft Regulation envisages that the cost of carbon will be reflected directly in companies' financial statements through mechanisms such as auctions of allowances in the primary market, trading in secondary markets, and the implementation of a complementary carbon price. This development necessitates that boards of directors incorporate environmental obligations and carbon pricing into their decision-making processes and reconsider their operational and investment strategies accordingly.
The Draft also introduces a mandatory requirement for companies within the scope of TR-ETS to obtain a Registered Electronic Mail (KEP) address and an e-notification address. This obligation compels legal entities to review their corporate communication infrastructure and commercial registry information to ensure compliance.
Lastly, the pilot phase (2026–2027) and the first implementation period (2028–2035) envisioned under the Draft Regulation provide a limited transition period for companies to restructure their internal processes concerning emissions management. Effective use of this period will be critical for ensuring regulatory compliance and mitigating the risk of potential future sanctions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
