A New Compliance Landscape for Companies with the Introduction of the Climate Law: Emission Permits, Data Obligations and the Sanctions Regime

Introduction

The regulatory landscape of climate change in Türkiye is no longer merely a matter of corporate social responsibility or sustainability reporting with the entry into force of the Climate Law No. 7552 on 9 July 2025 (the “Climate Law”). For businesses, particularly those with operations that directly generate greenhouse gas emissions, climate regulation now constitutes a binding legal compliance framework.

The Climate Law anchors this transformation within an integrated regulatory framework designed to drive the reduction of greenhouse gas emissions and facilitate the transition toward the net-zero target. This framework rests on interconnected mechanisms for permitting, monitoring, reporting, and enforcement.

The Emissions Trading System (“ETS”) is designed as a market-based instrument within this regulatory architecture to be implemented on a phased basis. A significant portion of the system’s operational details, however, is deferred to secondary legislation and to implementing rules to be adopted by the competent authorities. In this context, the Draft Regulation on the Turkish Emissions Trading System (the “TR-ETS Draft Regulation“), published by the Climate Change Chairmanship (the “Chairmanship”) on 22 July 2025, outlines a regulatory framework that goes beyond an environmental compliance tool. From a corporate perspective, it introduces a new layer of regulatory oversight that directly affects operational decision-making, financing structures, contractual arrangements, data governance, and carbon market compliance.

Greenhouse Gas Emission Permit: A Precondition for Operation

The Climate Law establishes the greenhouse gas emission permit as a prerequisite for the operation of installations falling within the scope of the ETS. Under the Law, activities covered by the ETS, that is, activities that generate direct greenhouse gas emissions, may not be carried out without first obtaining a greenhouse gas emission permit from the Chairmanship. While the Climate Law sets out the overarching framework of the ETS, the precise scope of covered activities, as well as the system’s technical parameters and sectoral boundaries, are to be further defined through secondary legislation.

The TR-ETS Draft Regulation further develops this framework through an approach based on installation size and categorical classification. Inclusion in the system follows a categorization model determined primarily by an installation’s annual emissions’ volume and the nature of its activities. Under the draft, Category B and Category C installations fall within the scope of the ETS, whereas installations falling below the prescribed emission thresholds, or those engaged solely in certain specified activities, remain outside the system. The draft also introduces transitional rules, including the continuation of ETS compliance obligations during the year in which an installation exits the scope of the system. This approach underscores that the scope of the ETS is not fixed; rather, it constitutes a dynamic framework, subject to adjustment in line with changes in an installation’s operations, capacity, and organizational structure.

The emission permit is not designed as a one-off administrative act limited to certifying compliance of an industrial site at the initial application stage. The Climate Law expressly provides that the greenhouse gas emission permit may be amended or revoked by the Chairmanship where, during the permit term, changes occur in the nature or operation of the installation, or in the identity of the permit holder. This provision means that corporate actions such as mergers and acquisitions, transfers of installations or businesses, capacity increases, modifications to production processes, and organizational restructurings must also be assessed from a climate compliance perspective. In this context, the emission permit emerges as a key legal due diligence consideration in corporate transactions, particularly with respect to changes in the identity of the permit holder, permit renewal obligations, and closing conditions.

The TR-ETS Draft Regulation further specifies the permit regime in procedural terms. Under the draft, operators falling within the scope of the ETS are required to apply to the Chairmanship in order to continue their operations, accompanied by technical documentation detailing the installation’s activity type and capacity, emission sources, monitoring methodology, and data management infrastructure. Applications are reviewed within the timeframes prescribed under the draft, and applicants may be granted an additional period to remedy any deficiencies. Application fees are not refunded where an application is ultimately rejected.

The draft further provides that the emission permit will be valid for a period of five years and must be renewed prior to its expiry. Any changes arising during the permit term must be reported to the Chairmanship. Taken together, these procedural requirements establish the emission permit as an ongoing compliance obligation, embedding continuous regulatory engagement into the operational lifecycle of ETS-covered installations.

Data Obligations: Monitoring, Reporting, and Verification

Under the Climate Law and the related ETS framework, data obligations form one of the core pillars underpinning the operation of the system. The Law ties the ETS compliance obligation to verify annual greenhouse gas emissions and requires operators to surrender allowances corresponding to their verified emissions.

The Law also grants the Chairmanship broad authority to request data. For the purposes of implementing the Law, the Chairmanship may directly request any information, documents, and data it deems necessary from natural and legal persons. Companies receiving such requests are obliged to provide the requested information free of charge and within the prescribed timeframes.

The TR-ETS Draft Regulation implements this data framework through a monitoring plan and annual reporting requirements. Operators falling within the scope of the ETS are required to prepare a greenhouse gas emissions monitoring plan specific to each installation and submit it to the Chairmanship for approval. Where the plan is found to be deficient, the operator must remedy the identified shortcomings. Following approval, operators are obliged to report their emissions and activity levels for the preceding calendar year by 30 April of each year.

Emissions reports must undergo independent verification before submission to the Chairmanship. The verification process is administered through the Central Electronic Verifier Accreditation System (“MEDAS“), and the draft expressly addresses verifier independence, the prohibition of conflicts of interest, and confidentiality obligations.

This regulatory framework requires companies to establish systematic processes for the generation, verification, and retention of emissions data. Failure to produce emissions data within the prescribed deadlines or to complete the verification process may directly affect compliance with allowance allotment obligations.

Sanctions Regime

The Climate Law establishes a layered enforcement structure for non-compliance with ETS obligations. Administrative sanctions may be imposed for failures such as the late submission of verified greenhouse gas emissions reports, the operation of installations without an emission permit, and failure to meet allowance allotment obligations.

Within the ETS, the core financial compliance mechanism is the allotment of allowances. The Law provides that, where operators fail to meet their surrender obligations, the shortfall will be carried forward and added to the following year’s surrender obligation. The draft further stipulates that allotment obligations are to be fulfilled on an installation basis through the Registry System, in accordance with the prescribed compliance calendar. It also clarifies that circumstances such as the cessation of activities, liquidation, or concordat proceedings do not extinguish the obligation to allotment allowances.

Where the verified emissions report is not submitted within the prescribed timeframe, transactions in the operator’s Registry System accounts, other than those related to the surrender obligation, may be temporarily suspended. Although this restriction is lifted upon submission of the report, an administrative fine may nonetheless be imposed.

Where the carbon emission obligation is not fulfilled within the prescribed period, the administrative fine is calculated using a market price-indexed formula for each unallotted allowance. Accordingly, as carbon prices rise, the cost of non-compliance increases proportionally.

The Law also provides for more severe consequences in cases of repeated non-compliance. Where a specified proportion of allowance allotment obligations remains unfulfilled for three consecutive years, the greenhouse gas emission permit may be revoked. In addition, the relevant operator may be barred from obtaining a new greenhouse gas emission permit for a period of three to six months.

Although administrative sanction decisions are subject to judicial review, legal proceedings to challenge the same do not automatically suspend enforcement of the sanction.

Transitional Period and Compliance Timeline

The Climate Law provides for a phased transition prior to the full implementation of the ETS. In this regard, operators are granted a compliance period of three years from the Law’s entry into force to obtain their greenhouse gas emission permits.

Under the TR-ETS Draft Regulation, the ETS is expected to commence with a pilot phase covering greenhouse gas emissions for the years 2026 and 2027. This transitional period affords operators a preparation window in which to establish the operational infrastructure required for emissions monitoring, reporting, and verification, and to complete the emission permitting process. In addition, during the pilot phase, administrative fines are to be applied at a rate reduced by 80%, thereby providing operators with technical and administrative flexibility during the system’s early stages of implementation.

Conclusion

The regulatory framework introduced under the Climate Law and the ETS establishes a multi-layered compliance landscape for companies. Taken together, the emission permit requirement, monitoring and reporting obligations, and the sanctions mechanism built around allowance surrender ensure that climate legislation directly affects corporate operations, financing, and governance.

Against this backdrop, ETS compliance demands systematic, enterprise-wide preparation across areas such as permitting processes, data infrastructure, internal controls, and allowance management.

As secondary legislation and administrative practice continue to evolve, the technical contours of the system are expected to become clearer. Companies should not treat compliance as a matter of regulatory monitoring alone, but should proactively build the necessary organizational and operational capacity. Early compliance readiness is poised to become a critical differentiator as the ETS becomes operational, particularly for managing regulatory risk, maintaining competitive positioning, and securing access to financing.