Turkey is advancing the development of a national Emissions Trading System (ETS) as part of its broader climate commitments under the Paris Agreement, at a time when carbon pricing is expanding globally, and the EU Carbon Border Adjustment Mechanism (CBAM) is set to impose a carbon cost on exports to the EU from 2026. As a major trading partner of the EU, the effectiveness of the Turkish ETS will be critical not only for reducing emissions but also shielding Turkish industry from CBAM costs and strengthening Turkey’s position in a decarbonising global economy.

This report assesses the draft regulation of the Turkish ETS against the experience from the EU ETS. It focuses on key design features that determine whether an ETS can deliver emission reductions effectively and fairly –  including cap-setting, auctioning and free allocation, the use of offsets, flexibility mechanisms, revenue use, governance and transparency – with a view to evaluating whether the system can align with the Paris Agreement, respect the polluter pays principle and protect Turkish industry from CBAM costs.