Always-on Compliance · Turkey Emissions Trading System
Does Turkey’s ETS Apply to Your Turkish Subsidiary? The 2026 Carbon Market Rules Explained for Foreign CFOs
On 21 October 2026, Turkey published the rulebook for how carbon allowances will actually be bought, sold, collateralised and invoiced. If your group owns a cement, steel, aluminium, fertiliser or power plant in Turkey, this is the regulation your treasury and accounting teams will live with.
Summarize with AI: ChatGPT Claude Perplexity Grok Gemini
Short answer. Turkey’s Emissions Trading System (TR ETS) covers installations that emit more than 50,000 tonnes of CO2-equivalent a year. A covered Turkish subsidiary must hold an emissions permit, file a verified emissions report by 30 April, open an account in the Transaction Registry System run by EPİAŞ, and surrender one allowance per tonne by the last business day of November. The pilot phase covers 2026–2027 emissions; 2026 is reporting-only, and carbon pricing starts in 2027.
- Scope is set by emissions, not by turnover or ownership. Foreign-owned plants are treated exactly like Turkish-owned ones.
- The new market regulation (Official Gazette No. 33407, 21 October 2026) sets the auction, spot trading, collateral, invoicing and payment rules. It is in force from publication.
- Market access is not automatic. Your subsidiary needs a registry account, a clearing-institution participant agreement, collateral and a registered KEP address before it can bid.
- Allowance trades are invoiced and carry VAT — the regulation’s collateral formula expressly adds the current VAT rate to the trade value.
- Payment windows are short: two business days after invoice notification. Late payment triggers default interest and a trading block.
- Carbon paid in Turkey matters for EU exports: under the EU CBAM, a carbon price effectively paid in the country of origin can reduce CBAM certificate costs, subject to evidence.
Turkey ETS Key Facts (as of 21 October 2026)
| Item | Rule | Legal basis |
|---|---|---|
| Framework law | Climate Law No. 7552 (Official Gazette 9 July 2025, No. 32951) | Law 7552 |
| System regulation | Türkiye Emission Trading System Regulation (permits, MRV, allocation, surrender) | Official Gazette 27 Aug 2026, No. 33353 |
| Market regulation | Regulation on the Operation of the Türkiye ETS Market, issued by the Energy Market Regulatory Authority (EPDK) | Official Gazette 21 Oct 2026, No. 33407 |
| Coverage threshold | Category B: >50,000 to 500,000 tCO2e/yr · Category C: >500,000 tCO2e/yr · Category A (≤50,000) has MRV duties but no surrender obligation | ETS Regulation Art. 5 |
| Pilot phase | 2026 and 2027 emissions; electricity generation, cement, iron and steel, aluminium, fertiliser; 2026 = reporting only; pricing from the 2027 system year | Carbon Market Board Decision KPK/2026/1 (3 Sep 2026) |
| Unit | 1 allowance = 1 tonne CO2e; 1 lot = 100 allowances | Market Reg. Art. 3, 12(4) |
| Market operator & registry | EPİAŞ (Energy Markets Operating Corporation) runs the auction, spot market and the Transaction Registry System (İKS) | Market Reg. Art. 4–6 |
| Price tick | Bids in TRY per tCO2e, in steps of 50 kuruş | Market Reg. Art. 12(4), 22(1)(g) |
| Verified report deadline | 30 April of the following year | ETS Regulation |
| Surrender deadline | Last business day of November | ETS Regulation |
| Invoice payment | By the 2nd business day after invoice notification | Market Reg. Art. 43(1) |
| Record retention (operator) | At least 10 years | Market Reg. Art. 53 |
| Still open | Free-allocation rates, benchmark values, offset ratio, auction calendar, futures market | Board / EPDK decisions pending |
Is My Turkish Subsidiary Covered by the Turkey ETS?
A Turkish subsidiary is covered if it operates an installation carrying out an activity listed in Annex 1 of the Türkiye ETS Regulation and that installation emits more than 50,000 tCO2e a year. Ownership is irrelevant: a plant owned by a German, US or Gulf parent is treated exactly like a Turkish-owned plant. Coverage is assessed installation by installation, not at group or company level.
Three points are routinely misread by group finance teams:
- The test is per installation. A company with two plants of 40,000 tonnes each is not in the trading scope through aggregation, but both plants still have monitoring, reporting and verification (MRV) duties as Category A.
- “Not covered” does not mean “no obligations”. Category A installations, and the excluded categories (schools, universities, hospitals, defence industry entities for their listed activities), continue to monitor, report and verify.
- Scope will widen. The pilot covers five sectors, but Annex 1 is broader. Paper, glass, ceramics, mineral wool and chemicals appeared in the 2025 draft list. Budget and contract planning should assume entry in a later period.
Category B vs Category C: what changes?
The category drives the size of administrative fines and, in practice, the scale of monitoring. Under Climate Law No. 7552, late submission of a verified emissions report carries a fine of TRY 627,450 to TRY 6,274,500 depending on category, doubled for ETS-covered installations. Operating without a valid greenhouse gas emissions permit carries TRY 1,254,900 to TRY 12,549,000. These are 2026 amounts and are revalued annually.
What Happens in the 2026–2027 Pilot Phase?
The Turkey ETS pilot phase covers 2026 and 2027 emissions from Category B and C installations in electricity generation, cement, iron and steel, aluminium and fertiliser (Carbon Market Board Decision KPK/2026/1). In 2026, covered installations have reporting obligations only. The pricing mechanism starts with the 2027 system year, so the first real allowance purchases fall in 2028.
Two transitional rules in the new market regulation matter for planning:
- Simulation first (Provisional Art. 1). Until the registry, auction and spot market go live, EPİAŞ runs a simulation in its market platform (ETSPYS) with no delivery, invoicing or payment obligations. This is the window to test internal approvals, bank guarantees and system access.
- 2026 Complementary Allowance Price Mechanism (Provisional Art. 2). For 2026 emissions, participants may request allowances up to their verified emissions under a complementary price mechanism. Each participant pays its own bid price (no uniform reference price is calculated), and the allowances go straight to the installation’s surrender account. The regulation states they are not taken into account for meeting the compliance obligation. Before bidding, a company should confirm with the Climate Change Directorate what these allowances are for in its own case — for example, CBAM evidence.
How Does a Company Get Access to the Turkish Carbon Market?
Every installation in the ETS must have an account in the Transaction Registry System (İKS) run by EPİAŞ. To open one, the operating company must sign a participant agreement with the central clearing institution, apply through EPİAŞ’s ETSPYS platform and sign the İKS participation agreement. EPİAŞ reviews the file within ten business days and gives ten business days to fix any deficiencies.
Step-by-step: from permit to first bid
- Greenhouse gas emissions permit from the Climate Change Directorate (valid 5 years; renewal at least 6 months before expiry; changes notified within 30 days).
- Clearing participant agreement with the central clearing institution licensed under Capital Markets Law No. 6362 (Market Reg. Art. 7(4)(a)). EPİAŞ energy markets already use this model, so a group with a Turkish power-trading subsidiary may have part of this in place.
- İKS account application via ETSPYS, with: the company registration form; the authorised signatories’ documents, as originals or notarised copies; the Turkish Trade Registry Gazette showing current signatories; and the signed İKS participation agreement (Art. 7(5)).
- Review: 10 business days. Deficiencies must be cured within 10 business days, or the company must re-apply (Art. 8).
- Primary market registration (auction): signed primary market participation agreement (Art. 9).
- Spot market registration: signed spot allowance market participation agreement (Art. 10).
- KEP address (registered electronic mail) kept up to date. Any notice not sent through ETSPYS is served in writing, and a notice to the KEP address counts as legally served (Art. 50).
- Collateral lodged before bidding (Art. 16(3), 35–37).
Registry transfers, issuance and surrender run only on full business days between 10:00 and 17:00 Turkish time, and never on weekends, public holidays or half-day holidays (Art. 6(3)). For a parent in a different time zone approving transactions, this is a real constraint around Turkish religious holidays.
Practitioner comment. The document list looks simple. In practice, delays come from signatory documents: a power of attorney issued abroad that has not been apostilled and translated, or a Trade Registry Gazette that does not reflect the latest board resolution. For foreign-owned subsidiaries, update the signatory circular and the registry record before starting the İKS application.
Primary Auction vs Spot Market vs Bilateral Deals: Which Route Applies?
Turkish carbon allowances reach companies in three ways: free allocation transferred to the installation’s registry account; purchase at EPİAŞ primary-market auctions at a single clearing price; and trading on the continuous spot market or through bilateral agreements reported to EPİAŞ. A futures market is foreseen but not yet established. Free allowances can be sold once they are in the account.
| Feature | Primary market (auction) | Spot allowance market | Bilateral agreement |
|---|---|---|---|
| Seller | Single seller: allowances issued to the state’s account | Any participant holding tradable allowances | Another participant |
| Bid direction | Buy-only | Buy and sell | Agreed privately |
| Price | Uniform: every winner pays the Allowance Reference Price (TRF), set by the last matched bid | Continuous order book; matched at the resting order’s price | Not regulated, but quantity notified |
| Timing | Calendar within 15 business days of the National Allocation Plan; each session announced ≥10 business days ahead; minimum 2 hours | At least 4 business days a month, 10:00–15:00 | Notified jointly by both parties via ETSPYS, 10:00–17:00; transferred at 17:05 |
| Minimum size | 1 lot (100 allowances) | 1 lot (100 allowances) | — |
| Collateral | Yes | Yes; no buy bids beyond collateral | Allowances blocked in seller’s account until transfer |
| Failure rule | Auction cancelled if bids are below the volume offered; re-run max. twice, then rolled to next year | Unmatched orders cancelled at session close | A notice from only one party is invalid |
Two special auctions you should know about
- Additional reserve auction (Art. 19). Only for installations short of allowances for their surrender obligation, and capped at that shortfall. The minimum bid price is set at 50% above the higher of the last three months’ weighted average primary price or spot price. It is an expensive backstop, not a procurement strategy.
- Complementary Allowance Price Mechanism (Art. 20). Pay-as-bid auctions where each participant pays its own price; allowances go directly to the installation’s surrender account.
Intra-group transfers between two Turkish plants
A company can move allowances between its own installations through the registry (Art. 6(2)(f)). If the transfer is between two separate legal entities in the same group, it becomes a bilateral agreement that both parties must notify. In tax terms, it is a related-party transaction that must be priced at arm’s length under Article 13 of the Corporate Tax Law No. 5520.
Collateral: What EPİAŞ Accepts and How It Is Calculated
To bid on the Turkish carbon market, a participant must post collateral equal to the value of its open bids and matched trades, plus the market operation fee, plus VAT. Accepted collateral is Turkish lira, US dollars or euros in cash, electronic bank letters of guarantee, Turkish government bonds, lease certificates, and Treasury Eurobonds. Allowances themselves cannot be pledged as collateral.
| Collateral type (Art. 36) | Practical note for foreign groups |
|---|---|
| Cash TRY | Simplest; valued at par and remunerated on a best-efforts basis, with interest paid the next business day |
| Cash USD or EUR | Valued at the CBRT buying rate announced at 15:30 the previous business day, with a haircut coefficient |
| Electronic letter of guarantee from a Turkish bank (TRY, USD, EUR) | Must be definite (kesin) and open-ended (süresiz) |
| Letter issued by a Turkish bank against a counter-guarantee from a foreign bank | The route most foreign parents use: the parent’s house bank counter-guarantees, and a Turkish bank issues the e-letter |
| Government bonds, Treasury lease certificates, Eurobonds | Valued at CBRT indicative or clearing-house prices, with haircuts |
The formulas in Article 35 are worth reading closely. For both the auction and the spot market, the required collateral is the bid and matched value, plus the market operation fee grossed up by (1 + VAT rate), plus the trade value multiplied by the VAT rate. In plain terms, a treasury team that sizes the guarantee only on “volume × expected price” will be short by the VAT amount. Collateral top-up calls are issued after each session. Withdrawals of excess cash TRY collateral are possible only between 15:05 and 15:40 on business days, and other types between 15:30 and 17:00 (Art. 38).
Invoicing, Payment and Default: The Rules That Hit Treasury
EPİAŞ issues invoices for primary and secondary market trades on the business day after the final settlement notice. Buyers must pay through their intermediary bank by the second business day after invoice notification. Sellers on the secondary market must send their own invoice to EPİAŞ within seven days. Late payment triggers default interest at the rate set under Article 51 of Law No. 6183 and a trading block.
- Settlement notices: preliminary by 16:00 and final by 17:00 on the session day (Art. 40).
- Fees: an annual participation fee, plus transaction fees for auction purchases, secondary trades and bilateral notices. EPDK sets these each year. The annual fee is billed on the first invoice each January and is not refunded on exit (Art. 41).
- Netting: a participant that is both debtor and creditor in a session is netted automatically (Art. 43(7)).
- Default sequence (Art. 44): after two business days, EPİAŞ draws on the ETS cash account, then on surplus TRY cash collateral, then on TRY cash collateral, and then on other collateral. A participant in default cannot trade, and the default is reported to EPDK.
- Disputes: 20 minutes to object to a trade confirmation (Art. 45); preliminary settlement objections by 16:30 the same day; invoice objections in writing within 8 days. An objection does not suspend payment (Art. 46).
A two-business-day payment window and a 20-minute objection window do not fit a group approval process that routes payments through a regional shared-service centre in another time zone. The Turkish entity needs local payment authority, a pre-approved carbon budget and someone who reads ETSPYS notices on session days.
Tax and Accounting Treatment of Carbon Allowances in Turkey
As of October 2026, the Turkish Revenue Administration (GİB) has not issued specific guidance on the corporate tax, VAT or statutory accounting treatment of TR ETS allowances. The market regulation assumes VAT applies to allowance trades, and secondary-market sellers must issue invoices. Companies should set a documented accounting policy now and seek clarification before the first priced year (2027).
| Question | What is clear | What still needs a position |
|---|---|---|
| VAT on allowance purchases | The Art. 35 collateral formula adds the current VAT rate to trade value and fees, which signals that VAT is invoiced | Rate, input VAT recovery mechanics, treatment of free allocation and surrender (no consideration) |
| VAT on allowance sales | A secondary-market seller issues an invoice to EPİAŞ within 7 days (Art. 42(3)) — e-invoice / e-archive rules apply | Whether any VAT exemption could apply; currently none is legislated |
| Corporate tax on sales | Gain on sale of allowances is commercial income under Corporate Tax Law No. 5520 | Tax base of free allowances (nil vs value) under the Tax Procedure Law (VUK) valuation rules |
| Deductibility of purchase cost | A cost incurred to keep an installation operating is, in principle, a business expense | Timing: expense when surrendered, when emissions occur, or when purchased |
| IFRS / TFRS reporting | No dedicated IFRS standard exists (IFRIC 3 was withdrawn in 2005) | Policy choice: intangible asset (IAS 38) or inventory, with a provision for the surrender obligation (IAS 37) — align with group policy for EU ETS |
| Intra-group transfers | Related-party transactions under Corporate Tax Law Art. 13 must be at arm’s length | Benchmark price when the spot market is thin |
| Default interest | Calculated at the Law No. 6183 Art. 51 rate | Treatment as a finance cost versus a non-deductible tax-type charge — we read it as commercial, but this should be confirmed |
Practitioner comment. Where a statute is silent, the Turkish tax audit tends to follow the invoice. If EPİAŞ invoices with VAT, the tax inspector will expect VAT to appear in your returns consistently on both purchases and sales. For groups that already run EU ETS accounting, the safest approach is to mirror the group IFRS policy in the TFRS reporting package and to document separately how the VUK statutory books depart from it. Where the Turkish position is genuinely unclear, a ruling request (özelge) under Article 413 of the Tax Procedure Law gives you Tax Certainty before the amounts become material.
Need a written position? Our Turkey ETS Tax & Accounting Review delivers a CPA-signed opinion on allowance accounting, corporate tax and VAT for your installation.
Turkey ETS vs EU ETS vs UK ETS: How Different Is the Turkish System?
The Turkey ETS is modelled on the EU ETS: a cap, free allocation based on benchmarks, auctions, a registry, a market stability reserve, banking and annual surrender. The main differences are the entry test (an emissions threshold of 50,000 tCO2e rather than the EU’s thermal-input thresholds), trading and settlement in Turkish lira, a state-owned energy-market operator, and a pilot that starts with reporting only.
| Feature | Turkey ETS | EU ETS | UK ETS |
|---|---|---|---|
| Entry test | >50,000 tCO2e per installation (Categories B/C) | Activity thresholds (e.g. 20 MW rated thermal input for combustion) | Activity thresholds similar to the EU’s |
| Currency | TRY | EUR | GBP |
| Auction platform | EPİAŞ | EEX | ICE Futures Europe |
| Auction pricing | Uniform price (TRF); pay-as-bid in the complementary mechanism | Uniform price | Uniform price |
| Allowance as collateral | Prohibited (Art. 48(2)) | Market practice permits it (financial instrument under MiFID II) | Financial instrument |
| Status in 2026 | Pilot; reporting only for 2026 | Mature (Phase 4) | Operating since 2021 |
For a group already running EU ETS compliance, the skill set transfers, but the operating model does not. Lira settlement, local guarantees and a two-day payment cycle mean the Turkish entity cannot be run as a back-office extension of the EU desk.
Turkey ETS and the EU CBAM: Why Your EU Customers Will Ask
From 2026, EU importers of cement, iron and steel, aluminium, fertilisers, hydrogen and electricity must buy CBAM certificates for embedded emissions. Under Article 9 of Regulation (EU) 2023/956, a carbon price effectively paid in the country of origin can reduce the number of certificates the importer must surrender. A Turkish ETS cost can therefore be partly recovered in the export price, if it is documented.
The pilot sectors were not chosen at random — they overlap almost exactly with the CBAM sectors. For a Turkish subsidiary that exports to an EU affiliate, three accounting consequences follow:
- Allowance purchase invoices, surrender records and verified emissions reports become export documentation, not only compliance records.
- Any adjustment for free allocation reduces the “effectively paid” carbon price, so the net figure must be traceable per installation and per product.
- Intra-group sale prices that move carbon cost between Turkey and the EU affiliate need a transfer pricing rationale under Corporate Tax Law Art. 13.
Case Analyses: Where the Obvious Answer Fails
The scenarios below are anonymised and simplified illustrations of situations we see in practice. Facts have been changed. They are not guarantees of outcome.
Case 1 — The EU-listed cement group that sized its guarantee on price × volume
Facts. A Turkish clinker plant (Category C) owned by an EU group. The group treasury arranged a bank guarantee equal to expected 2027 auction volume multiplied by an estimated price.
The obvious answer. “The guarantee covers our bids.”
Why it failed. Article 35 adds VAT on the trade value plus a VAT-grossed-up operation fee to the required collateral. The guarantee also needed to be open-ended and issued electronically by a Turkish bank. The parent’s existing EUR guarantee line was time-limited.
Structure adopted. A counter-guarantee from the parent’s house bank to a Turkish bank issuing an open-ended e-letter, sized on value + VAT + fees + a top-up buffer, and a local cash TRY buffer for same-day top-up calls.
Case 2 — The steel subsidiary with two legal entities and one plant site
Facts. A US-owned group holds a melt shop and a rolling mill in two separate Turkish companies on the same site, and plans to “move allowances where they are needed”.
The obvious answer. “It is one group, so we will rebalance internally.”
Why it failed. A transfer between installations of the same legal entity is a registry transfer. Between two legal entities, it is a bilateral agreement that both parties must notify, the transferred allowances are blocked until 17:05, and the transaction is a related-party sale under Corporate Tax Law Art. 13, which needs an invoice, VAT treatment and an arm’s-length price.
Structure adopted. An intra-group allowance supply agreement priced by reference to the EPİAŞ weighted average spot price (published per session under Art. 24(3)), with the transfer pricing file updated.
Case 3 — The aluminium exporter that ignored 2026
Facts. A Gulf-owned aluminium semi-finished products plant (Category B) treated 2026 as “no cost, no action” and left monitoring to the plant engineers.
The obvious answer. “Nothing is purchased until 2027–2028.”
Why it failed. The 2026 verified report feeds the activity level used for free allocation, and the EU customer requested verified emissions data for CBAM in the same quarter. The plant had no finance-owned reconciliation between production data and the emissions report.
Structure adopted. A finance-owned carbon ledger reconciling verified emissions, production tonnage and invoiced exports, reviewed alongside the year-end close.
What Drives the Cost of Turkey ETS Compliance?
The cost of Turkey ETS compliance is driven by the installation’s shortfall (verified emissions minus free allocation), the allowance price, the cost of carrying collateral, EPİAŞ participation and transaction fees, verification-body fees, and internal finance and treasury effort. From 2027, the largest variable is the allocation shortfall, which depends heavily on the quality of the 2026 data.
| Cost driver | Who controls it | How to reduce it |
|---|---|---|
| Allocation shortfall | Board benchmarks + your activity data | Accurate 2026–2027 MRV data; timely free-allocation application (30 days) |
| Allowance price | Market | Planned auction participation; avoid the additional-reserve floor price |
| Collateral carrying cost | Treasury | Choose collateral mix; withdraw surplus within the permitted windows |
| EPİAŞ fees | EPDK (annual) | Consolidate trading in fewer sessions; avoid unnecessary market registrations |
| Default interest | You | Local payment authority; two-business-day cycle in the payment calendar |
| Tax leakage | You | Correct VAT handling, an arm’s-length intra-group price and a documented accounting policy |
Seven Mistakes Foreign Groups Make With the Turkey ETS
- Treating the ETS as an environmental-team issue. From 2027 it is a treasury, tax and accounting issue.
- Sizing collateral without VAT. Article 35 includes it.
- Routing payments through a foreign shared-service centre. Two business days is too short.
- Ignoring the KEP address. A notice sent to the KEP address is legally served, whether or not anyone reads it.
- Assuming allowances can secure financing. Article 48(2) prohibits using them as collateral.
- Booking intra-group transfers without invoices. Transfers between entities are related-party sales.
- Not keeping CBAM-grade evidence. Carbon cost you cannot document cannot be credited by your EU customer.
What Happens If…
What happens if we miss the 30 April verified report deadline?
An administrative fine under Climate Law No. 7552 applies (TRY 627,450–6,274,500 in 2026, doubled for ETS-covered installations). Under the market regulation, EPİAŞ also blocks the participant from trading on its registry account, except to surrender allowances, until the report is submitted (Art. 4(8)).
What happens if we do not pay an EPİAŞ invoice within two business days?
Default interest runs at the Law No. 6183 Art. 51 rate. EPİAŞ draws on your ETS cash account and then your collateral. If that is not enough, you are in invoice default without further notice, you cannot trade on the primary or secondary market, and EPDK is informed (Art. 44).
What happens if we are short of allowances in November?
You can buy on the spot market, use the additional reserve auction (only up to your shortfall, at a floor of 150% of recent average prices), or carry the shortfall: under the ETS Regulation, an unmet amount is added to the next year’s surrender obligation. The shortfall survives liquidation or a concordat.
What happens if our plant drops below the threshold?
Once the Climate Change Directorate notifies EPİAŞ that the installation is out of scope, the account becomes sell-only after any remaining obligation is met. If an obligation remains, it becomes buy-only for the shortfall (Art. 4(9)).
What happens if EPİAŞ’s system fails during a session?
EPİAŞ can set new deadlines, cancel an auction or suspend spot contracts. Default interest does not apply where payment failure is caused by a validated system failure on the side of EPİAŞ or the clearing institution (Art. 44(5), 47).
90-Day Turkey ETS Readiness Checklist for the Turkish Subsidiary
- Confirm the installation category (A/B/C) and the pilot-sector status for each Turkish plant.
- Confirm the monitoring methodology plan has been filed (deadline: two months from 27 August 2026, extendable by up to six months).
- Update the signatory circular, powers of attorney (apostilled and translated) and the Trade Registry record.
- Register or confirm the company’s KEP address and assign someone to monitor it.
- Open discussions with the clearing institution and a Turkish guarantee bank; agree a counter-guarantee if the parent bank is foreign.
- Prepare the İKS account application package for the simulation phase.
- Write the carbon accounting policy (IFRS/TFRS and VUK), VAT treatment and the intra-group pricing rule.
- Set local payment authority and a carbon budget approved by the parent.
- Build the carbon ledger: verified emissions ↔ production ↔ exports (for CBAM).
- Calendar: 30 April (report), National Allocation Plan +30 days (free allocation application), last business day of November (surrender).
Frequently Asked Questions
Is the Turkey ETS mandatory for foreign-owned companies?
Yes. Coverage depends on the activity and emissions of each installation, not on the nationality of the shareholder. A Turkish subsidiary of a foreign group operating an Annex 1 installation above 50,000 tCO2e a year has the same obligations as a Turkish-owned company, including permits, verified reporting, registry account and surrender.
When does carbon actually start costing money in Turkey?
Under Carbon Market Board Decision KPK/2026/1, 2026 is a reporting-only year and the pricing mechanism starts in the 2027 system year. Allowances for 2027 emissions are surrendered by the last business day of November 2028, so the first purchases will in practice take place in 2028, unless a company joins earlier auctions or the complementary mechanism.
Who runs the Turkish carbon market?
EPİAŞ (Energy Markets Operating Corporation) operates the primary auction, the spot allowance market and the Transaction Registry System, under rules issued by the Energy Market Regulatory Authority (EPDK). The Climate Change Directorate (İDB) issues permits, sets the auction calendar and the National Allocation Plan. The Carbon Market Board (KPK) sets pilot scope, price corridors and offset ratios.
Can a foreign parent company trade Turkish allowances directly?
The market regulation defines a market participant as a company within the ETS scope that has signed the İKS participation agreement. The account is opened in the name of the operating company for its installations. A foreign parent without a covered Turkish installation is not described as a participant, so trading is normally done by the Turkish subsidiary.
Is VAT charged on Turkish carbon allowances?
The market regulation’s collateral formula includes the current VAT rate on both trade value and market fees, which indicates that EPİAŞ invoices include VAT. As of October 2026, there is no specific Revenue Administration guidance on VAT recovery or on free allocation, so companies should document their position and consider a ruling request.
Can unused Turkish allowances be carried forward?
Yes. Banking (using allowances in later years of the period) and borrowing (using future years’ allowances within the period) are recognised in the registry functions under Article 6(2)(g) of the market regulation. Allowances not surrendered by the end of their validity are cancelled.
Can carbon allowances be seized or pledged?
Allowances cannot be provided as collateral. Free allowances subject to a surrender obligation cannot be seized until they are transferred out of the İKS account they were first credited to (Art. 48(2)). Rights and receivables under the regulation can be assigned or pledged only with EPİAŞ approval.
Do we need a Turkish accountant for ETS, or is this an engineering matter?
Monitoring and verification are engineering and verification-body work. Registry access, collateral, invoices, VAT, payment, intra-group pricing, IFRS/TFRS and statutory reporting, and CBAM cost evidence are finance work done under Turkish tax and accounting law. Most covered groups need both, coordinated by the Turkish entity’s finance team.
Always-on Compliance for Your Turkish Carbon Obligations
Every installation is different: emissions profile, group structure, bank lines, intra-group flows and EU export exposure all change the answer. SYSTEMS CPA supports foreign-owned Turkish companies with the finance side of the Turkey ETS: carbon accounting policy (TFRS and statutory books), VAT and invoicing set-up, collateral and payment workflow design, intra-group transfer pricing, and CBAM-ready cost documentation, alongside ongoing accounting and tax compliance.
See the scope of our Turkey ETS Tax & Accounting Review, or request a proposal. You can also write to info@ozmconsultancy.com with your installation category, sector and group structure. Phone +90 216 352 29 61 · WhatsApp +90 506 682 96 55.
Primary Sources and Legal References
- Regulation on the Operation of the Türkiye Emission Trading System Market (EPDK), Official Gazette 21 October 2026, No. 33407 — resmigazete.gov.tr
- Türkiye Emission Trading System Regulation, Official Gazette 27 August 2026, No. 33353 — resmigazete.gov.tr/eskiler/2026/08/20260827-7.htm
- Climate Law No. 7552, Official Gazette 9 July 2025, No. 32951 — mevzuat.gov.tr
- Electricity Market Law No. 6446, Art. 11 — mevzuat.gov.tr
- Carbon Market Board Decision KPK/2026/1 (pilot implementation period) — iklim.gov.tr
- Corporate Tax Law No. 5520, Art. 13 (transfer pricing); Tax Procedure Law No. 213, Art. 413 (rulings) — gib.gov.tr
- Law No. 6183 on the Collection Procedure of Public Receivables, Art. 51 — mevzuat.gov.tr
- Regulation (EU) 2023/956 establishing a Carbon Border Adjustment Mechanism, Art. 9 — eur-lex.europa.eu
Disclaimer. This article is provided for general informational purposes and does not constitute legal, tax, accounting or investment advice. Turkish treatment depends on the installation, legal structure, documentation and specific facts, and several Turkey ETS parameters still await Carbon Market Board and EPDK decisions. Obtain professional advice before acting.
Turn Turkey compliance into certainty
SYSTEMS CPA supports foreign-owned companies with company formation, accounting, tax compliance and payroll in Turkey — one accountable local partner. Reviewed by Evren Özmen, SMMM (Certified Public Accountant), TÜRMOB Reg. No. 35675.
Practitioner comment — CPA Evren Özmen. Most groups I speak with treat 2026 as a “free year” because nothing is bought. That is the wrong reading. The 2026 verified report becomes the activity-level data on which free allocation is calculated. A weak monitoring plan in 2026 locks in a weak allocation for the period that follows. The cash cost of the ETS starts in 2027; the data cost starts now.