Türkiye has entered a new era in the fight against climate change with the publication of its first Climate Law in the Official Gazette on July 9, 2025. Aimed at supporting the transformation of both the public and private sectors toward achieving the 2053 net-zero emissions target, this law establishes the legal foundation for sustainable development. Its scope is not limited to companies; it also includes broad regulations such as updating the education curriculum, developing carbon capture and storage technologies, making recycled products mandatory in the public and private sectors, implementing climate change incentive mechanisms, and establishing a Green Taxonomy. In this context, the National Contribution Statement also stands out as an important element. Prepared under the coordination of the Climate Change Presidency and submitted to the United Nations Framework Convention on Climate Change Secretariat, this document sets out Türkiye's greenhouse gas emission reduction and climate change adaptation targets in line with international standards and establishes a strategic roadmap for the adaptation process. The Law, which has a broad scope, is not merely a compliance requirement for the business world; it also represents a strategic opportunity to enhance competitiveness in global markets through green transformation. The system that imposes costs on businesses for their greenhouse gas emissions is implemented through two main models in line with the “polluter pays” principle:

• Carbon Tax: A fixed fee per ton (e.g., €25 per ton of CO₂ emissions).
• Emissions Trading System (ETS): The buying and selling of rights allocated to companies within a government-set emissions cap. For example, a cement factory that emits less carbon than the set limit can sell its excess emissions rights to another company and generate revenue. Companies that exceed the emissions cap will be forced to reduce their emissions to avoid paying additional costs.

By 2025, more than 80 countries will have implemented at least one of these systems, with global carbon pricing revenues exceeding $100 billion. Approximately 50% of this revenue is being directed toward environmental, infrastructure, and development projects. Carbon pricing does more than just encourage emissions reductions; it also provides a strong financial source for investing in new technologies, increasing green employment, and fostering sustainable growth. As a result, it is expected that the number of countries implementing similar models will increase in the coming years, and the global carbon market will become more integrated. With the Climate Law, carbon pricing –the process of recognizing greenhouse gas emissions as a cost factor and pricing them through economic instruments– is now becoming an integral part of the economic system. Under the Climate Law, the Climate Change Presidency will establish an ETS, and activities will be carried out through the ETS. For Türkiye, this process is critical to aligning with the European Union's (EU) Carbon Border Adjustment Mechanism (CBAM), maintaining competitive advantage in export markets, and accelerating the green transition. The World Bank's 2025 Carbon Pricing Report reveals that investors are shifting their focus from emission reduction to projects that directly remove carbon. For example, offsetting 1 ton of CO₂ by planting trees costs $15.5, while offsetting it with renewable energy costs approximately $1. This difference makes the quality of carbon projects critical and strengthens the potential for increasing demand for high-quality projects in Türkiye's ETS process. Türkiye’s ETS Journey The Climate Law establishes the legal framework necessary for Türkiye’s transition to ETS. This transition is critical for the EU’s compliance with the ETS. In the first phase of the ETS, energy-intensive sectors with a significant share in foreign trade, such as cement, iron and steel, aluminum, energy, chemicals, fertilizers, glass, and paper, are covered. With this regulation, the EU aims to protect its producers and promote cleaner production methods in countries with which it trades. Türkiye's strong trade ties with the EU and the fact that a significant portion of its exports are concentrated in these sectors make its compliance with the ETS critical. For companies operating in these sectors, obtaining emission permits and calculating their carbon footprint will become inevitable. Companies unable to reduce their emissions will either have to purchase emission credits under the ETS or face penalties. During this process, the institutional framework established to ensure the effective operation of the ETS will determine the reliability and transparency of the market mechanism. Revenues generated under the law consist of revenues from permits obtained by companies for greenhouse gas emissions, revenues from rights sold in the ETS, revenues from transactions in the market, 50% of the revenues of the market operator, contributions from international carbon credits, and 50% of administrative fines imposed. These revenues are specified to be used exclusively for green transformation and combating climate change. Additionally, up to 10% of the revenues may be allocated to fair transition measures. The ETS system will be implemented within a multi-stakeholder and institutionalized structure. The Carbon Market Board will be established with the participation of seven ministries (Ministry of Environment, Urbanization, and Climate Change, Energy and Natural Resources, Treasury and Finance, Industry and Technology, Trade, Agriculture and Forestry, and Transportation and Infrastructure) along with representatives from the Energy Market Regulatory Authority (EMRA), the Capital Markets Board (CMB), and the Climate Change Presidency. This board will determine emission allowances and make strategic decisions. The Advisory Board will include representatives from the business community, such as the Turkish Union of Chambers and Commodity Exchanges (TOBB), the Foreign Economic Relations Board (DEİK), the Turkish Industrialists' and Businessmen's Association (TÜSİAD), the Independent Industrialists' and Businessmen's Association (MÜSİAD), and the Turkish Exporters' Assembly (TİM), to convey the views of the private sector. The Climate Change Presidency will be responsible for monitoring and reporting emissions and supervising the use of carbon credits, as well as coordinating the technical aspects of the process. EPDK, EPİAŞ, and the Central Settlement Authority will be responsible for market oversight, financial transactions, and the operation of registration systems. At the local level, Provincial Climate Change Councils will be established in all 81 provinces to implement province-specific action plans and ensure the effective implementation of the process on the ground. This institutional framework will not only govern the administrative and technical operations of the ETS but also shape investment trends in the carbon market. What's in Store for Export Companies? Businesses have been given a three-year transition period until 2027 to adapt to the system. During this period, businesses are expected to set up emission measurement systems, strengthen their reporting infrastructure, and shift toward climate-friendly investments. The goal is for businesses to comply with the ETS from both a technical and financial standpoint. All businesses, particularly those in the industrial and energy sectors, will have to comply with both internal regulations and sustainability criteria in external markets during this process. For companies exporting to large markets such as the EU, compliance with carbon pricing systems is now becoming one of the key elements in maintaining their competitive edge. Contrary to common misconceptions, this law:

• Does not impose a carbon tax on individuals,
• Does not ban agriculture and livestock farming,
• Does not promote the production of artificial meat,
• Promotes nature-based solutions,
• Focuses on industrial emissions.

However, two important criticisms stand out in public opinion: First, some articles in the law are open to interpretation and may create uncertainty during the implementation process. Draft secondary legislation on these issues is currently being prepared. Second, why should Türkiye take on these obligations when its share of total global emissions is relatively low, and some countries emit many times more than it does? At this point, it should not be forgotten that the main purpose of the law is both to contribute to climate targets and to avoid losing competitive advantage in export markets. Conclusions and Recommendations The Climate Law is not merely a legal compliance process for the business world; it is a strategic opportunity to integrate into global competition and secure a strong position in the green transformation process. In particular, compliance with applications such as SKDM in trade relations with the EU is critical for both maintaining existing market share and facilitating access to new markets. In this context, companies:

• Start measuring and regularly reporting carbon footprints,
• Plan technical and operational investments aimed at reducing emissions,
• Develop strategies for accessing carbon credits and green financing sources,
• Apply sustainability criteria at every stage of the supply chain.

For exporting businesses, this transformation is not a short-term cost; it will become the business model of the future, enhancing competitive strength, increasing brand value, and securing a sustainable position for companies in international markets.