Law No. 7552 on Climate

I. INTRODUCTION

With the Climate Law (“Law”) published in the Official Gazette dated 9 July 2025, Türkiye aims to combat climate change in line with its green growth vision and net zero emission target.

The Law introduces significant obligations for all stakeholders, regardless of whether they are in the public or private sector and includes comprehensive regulations in various areas such as carbon markets, greenhouse gas reduction, climate adaptation, planning tools, and administrative sanctions.

With the enactment of the Law:

• The Climate Change Presidency (“Presidency”) has been authorized as the main coordinator for the implementation of climate policies,
• Public institutions and the private sector have been made responsible for fulfilling the tasks defined in line with the Nationally Determined Contribution[1] and the net zero emission target to be prepared by the Presidency.

The Law comprehensively regulates:

(i) the fundamental principles of combating climate change,

(ii) the planning, implementation, and financing tools to support greenhouse gas emission reduction and climate adaptation activities,

(iii) the powers and responsibilities of relevant institutions and organizations, and

(iv) the procedures and principles of the emissions trading system.

This memorandum is intended to provide a general overview of the obligations, risks, and preparation processes your company may face under the relevant legislation.

II. ANALYSIS

1. Reduction of Greenhouse Gas Emissions and Adaptation Activities

The principle of a “just transition” set forth in the Law aims to ensure the prioritization of vulnerable groups—such as women, children, the elderly, persons with disabilities, and rural populations—during the climate change mitigation process, to manage the employment impacts, and to ensure that this transformation is socially sustainable. In this context, it is recommended that companies incorporate the “just transition” approach into their corporate social responsibility policies, sustainability reporting, and human resources planning.

The regulation imposes an obligation on public institutions and organizations to issue and monitor regulations as needed to implement sectoral policies and achieve targets related to greenhouse gas emission reduction efforts.

Institutions and organizations are required to implement the following mitigation measures in sectors specified in the Nationally Determined Contribution, in a manner compatible with the net zero emission target and the circular economy approach:

• Energy, water, and raw material efficiency,
• Prevention of pollution at its source,
• Increasing the use of renewable energy,
• Reducing the carbon footprint of products, businesses, and institutions,
• Use of alternative clean or low-carbon fuels and raw materials,
• Promoting electrification and developing and increasing the use of clean technologies.

They are also responsible for the implementation, monitoring, and establishment of a zero-waste system alongside the application of the above-mentioned measures.

In addition, the Law stipulates that, within the scope of climate change adaptation activities and in line with the Nationally Determined Contribution, adaptation measures shall be implemented to prevent existing and potential climate-related damages, minimize associated risks, or take advantage of emerging opportunities.

Institutions and organizations may face additional obligations through secondary legislation to be enacted in the future as part of the implementation of the targets set out in the Law. Therefore, it is essential that companies develop their climate strategies not only in compliance with current obligations, but also in a manner that ensures alignment with future regulations and practices.

2. Planning and Implementation Tools

• National climate strategy and action plans will be prepared under the coordination of the Climate Change Presidency.
• A Provincial Climate Change Coordination Board will be established in each province to initiate the local planning process.
• A Turkish Green Taxonomy will be developed to guide environmentally sustainable investments.
• A Carbon Border Adjustment Mechanism (CBAM) applicable to the customs territory may be introduced.

With the establishment of the Turkish Green Taxonomy, investments aligned with sustainability criteria will gain easier access to financing, while projects with significant environmental impacts may be excluded from financial resources. Additionally, in order to align with regulations such as the European Union’s CBAM, it has become a strategic necessity for producers in Türkiye to strengthen their carbon management and reporting infrastructure.

3. Establishment of the Emissions Trading System and Allowances

For the first time in Türkiye, a market-based mechanism has been established to cap greenhouse gas emissions through the implementation of an Emissions Trading System (“ETS”). Under the ETS framework, allowances representing rights to emit greenhouse gases will be allocated to entities operating in designated sectors for each calendar year. These allowances will be tradable instruments within the market.

An allowance confers the right to emit one metric ton of carbon dioxide equivalent and is fungible, transferable, electronically issued, and may only be transferred within the registry system. Allowances are not subject to public procurement legislation, may not be pledged as collateral, and are immune from seizure or attachment.

The Energy Markets Operating Company (EPİAŞ) has been designated as the market operator within the ETS. EPİAŞ will be responsible for the administration of allowance transactions, regulation and oversight of market operations, and will act as the central clearing house, ensuring post-trade financial settlement. The issuance, registration, and transfer of allowances will be conducted through this platform.

In order to participate in the ETS, entities must obtain an emission permit from the Presidency of Climate Change. This permit is a prerequisite not only for entry into the system but also for the future receipt of allowance allocations. The Presidency is responsible for regulating and supervising all stages of the system, from its inception to its operation. Furthermore, entities are obligated to surrender allowances equal to the amount of greenhouse gas emissions they produce each year.

Entities that fail to fulfill their surrender obligations must, in the following year, surrender an amount of allowances equivalent to the previous year’s deficit in addition to meeting that year’s obligation. Events such as cessation of operations, liquidation, bankruptcy, or concordat do not exempt the entity from this surrender obligation.

To ensure the effective functioning of the ETS, flexibility mechanisms (such as banking, borrowing, and offsetting) and market stability instruments will be developed.

In order to support entities in meeting their allowance obligations, a national carbon crediting and offsetting system will be established, with the operational principles to be set by the Presidency. Additionally, a voluntary carbon market will be integrated into the ETS framework, allowing entities outside the scope of the ETS to voluntarily participate by purchasing carbon credits to offset their own emissions.

4. Use of Revenues and Support Mechanisms

Pursuant to the Law, a designated portion of the revenues derived from the issuance of greenhouse gas emission permits and the imposition of administrative sanctions shall be recorded as special revenues under the general budget. These revenues shall be allocated to strategic areas, including but not limited to:

• the financing of the green transition,
• support for climate-friendly investments,
• sectoral technological transformation,
• research and development activities, and
• the implementation of clean production practices.

Within this framework, it is of particular importance for the private sector to develop projects that align with national climate objectives in order to benefit from the available support mechanisms.

5. Sanctions and Penalties

Under the new regulatory framework, it is stipulated that entities committing prohibited acts shall be subject to various administrative monetary fines, depending on the nature and severity of the violation. In certain cases, restrictions on operations or business activities may also be imposed.

Specific enforcement mechanisms have been introduced, particularly with respect to non-compliance with ETS obligations. These include:

• In cases where a verified greenhouse gas emissions report is not submitted on time as required by legislation, the system will automatically restrict any transactions involving allowances in the entity’s registry account, except for the surrender of allowances to meet compliance obligations. The restriction will be lifted upon submission of the verified report. However, submission of the report does not preclude the imposition of an administrative fine.
• Entities operating within the scope of the ETS without a valid greenhouse gas emissions permit, or those continuing operations with an expired or revoked permit, shall be subject to administrative fines calculated based on specific proportions of relevant metrics.
• Entities failing to surrender the required number of allowances within the prescribed timeframe will be subject to an administrative monetary fine equal to twice the higher of (i) the weighted average price of allowances in the primary market or (ii) the weighted average price in the secondary market, during the last three months of the relevant compliance year, per missing allowance.
• If an entity fails to fulfill at least 80% of its annual surrender obligation on time for three consecutive years, its greenhouse gas emissions permit shall be revoked, and a new permit shall not be granted for a period of between three and six months.

The authority to supervise and audit lies with the Presidency of Climate Change, which may, where necessary, conduct audits through the provincial directorates of the Ministry of Environment, Urbanization and Climate Change (“Ministry”). The Presidency is also authorized to issue and serve administrative sanction decisions.

In cases of non-compliance with ETS obligations, companies may face not only monetary fines but also operational restrictions, which can have a direct impact on business continuity.

For certain types of non-compliance, the Law provides for a remedial grace period. In such cases, the Ministry may, once only, grant a period of up to one year for rectification of the breach. Failure to comply within the granted period may result in a temporary suspension of operations. However, the granting of such a grace period does not preclude the imposition of administrative penalties.

6. Provisional Agreements

Pursuant to the provisional arrangements introduced by the Law, a pilot phase shall be implemented prior to the full enforcement of the ETS. During the pilot phase, administrative fines imposed due to non-compliance with the obligations stipulated under the Law shall be applied with an 80 percent reduction.

Furthermore, enterprises falling within the scope of the ETS are required to obtain a greenhouse gas emission permit within three years following the effective date of the Law, which is 9 July 2025. Within this three-year period, it shall be considered, on a one-time basis, that such enterprises are deemed to have been granted greenhouse gas emission permits for the continuation of their operations under the ETS. Where necessary, this period may be extended by the competent authority for up to two additional years from the end of the initial deadline.

During the pilot phase, allocation units under the ETS shall not be subject to trading. The system shall be operated for testing purposes only.

The Law applies not only to private sector entities but also to public institutions. In this context, all public institutions and organizations are obliged to update their climate change strategy and action plans by 31 December 2027 and to prepare their respective local climate action plans within the same period.

III. CONCLUSION AND EVALUATION

With the enactment of Law No. 7552, the long-standing efforts to achieve green growth and the net zero emissions target have been incorporated into a binding legal framework. In this regard, it is of critical importance that entities falling within the scope of the ETS comply fully with their statutory obligations by obtaining the required emission permits within the time periods established under the transitional provisions.

Accordingly, it is essential that companies plan and implement their emission permit processes, establish internal compliance and monitoring mechanisms, and conduct legal and technical assessments to determine whether their operations fall within the scope of the ETS.

Non-compliance with the obligations introduced under the Law may result in significant administrative monetary penalties and operational restrictions.

Specifically, pursuant to Article 14 of the Law:

• Legal entities that continue operations without obtaining the required greenhouse gas emission permit, or whose permits have been revoked, may be subject to administrative fines of up to TRY 50.000.000.
• Legal entities that fail to obtain an emission permit or continue operations after the expiration of such permit may be subject to administrative fines of up to TRY 100.00.000.
• Entities that fail to fulfill their obligations under the ETS, including the surrender of allocation units, shall be subject to an administrative fine in the amount of TRY 10.000 per ton of carbon dioxide equivalent greenhouse gas not surrendered.
• Entities that act contrary to other procedural or substantive provisions of the Law may also be subject to administrative fines and operational restrictions in accordance with the relevant provisions.

The Law signifies the beginning of a new era not only in environmental regulation but also in the broader transformation of financial systems, production structures, and employment dynamics in line with the emerging climate economy.

It is therefore not sufficient for companies to comply solely with the current obligations. They are strongly advised to adopt a forward-looking compliance strategy to align with forthcoming secondary legislation and sectoral action plans that will be introduced in the future.

[1] Under the coordination of the Presidency and in cooperation with the relevant institutions and organizations, this document is periodically prepared in accordance with international agreements and standards, incorporating the targets and commitments regarding the reduction of greenhouse gas emissions and adaptation to climate change, and is submitted to the Secretariat of the United Nations Framework Convention on Climate Change.