Türkiye’s environmental policy reframes the fight against climate change- not as a headwind to economic growth, but as a driver of inclusive prosperity and sustainable development.
While maintaining industrial momentum, Türkiye continues to slash emissions through its green transition. As of late 2025, the country ranks 11th globally and 5th in Europe in installed renewable energy capacity.
In a major diplomatic milestone, Türkiye is set to host the 31st UN Climate Change Conference (COP31) in Antalya in November 2026. Under the agreed partnership, Türkiye will spearhead the summit’s organizational logistics, while Australia leads the high-level negotiations.
This framework reflects Türkiye’s systematic efforts since 2021 to align national regulations with the European Union’s 2019 Green Deal.
The process is anchored by the Climate Law enacted in 2025, which sets mandatory standards and a regulatory framework for meeting national emission targets.
A critical turning point came on Jan. 1, 2026, with the launch of the Carbon Border Adjustment Mechanism (CBAM).
By imposing carbon-based levies on exports to Europe, the mechanism has triggered a new era of competition for Turkish exporters.
However, this transition has coincided with severe volatility in global energy markets.
Following retaliatory strikes against US-Israeli operations that began on Feb. 28, Iran’s closure of the Strait of Hormuz on March 1 sent oil prices skyrocketing from $72 to $119.
Despite a subsequent ceasefire, energy costs remain above pre-war levels after the 40-day conflict.
The price surge has reignited debate over the economic toll of EU climate mandates and their potential to undermine industrial competitiveness.
At the center of this debate is the EU Emissions Trading System (EU ETS), in place since 2005, which is now under increasing scrutiny as industries link rising carbon costs to economic strain.
Under this system, each carbon allowance acts as a direct pollution fee for every ton of carbon dioxide emitted. However, while carbon credits can be used as offset certificates, the EU maintains strict limits on their use to ensure that companies prioritize reducing emissions directly at the source.
Türkiye followed suit, launching its national emissions trading system pilot in early 2026 under the 2025 Climate Law.
The rollout coincided with global turbulence as Türkiye adopted carbon trading amid US tariffs, shifting EU climate debates, and the Iran war-linked energy crisis, which sent energy prices spiraling and fueled inflation risks.
Roughly 15 days before the energy crisis, the Belgian city of Antwerp hosted the second annual summit in mid-February, bringing together around 1,300 companies and industrial organizations, including BASF.
The summit focused on the economic challenges posed to heavy industry by the EU ETS.
German Chancellor Friedrich Merz stated that the current carbon market system harms industry and called for revision.
French President Emmanuel Macron warned that high energy and carbon costs are accelerating deindustrialization rather than enabling a green transition, stressing that Europe’s industrial base must be protected.
The summit produced some of the harshest discussions yet within the EU on climate policy. Carbon prices, which had surpassed €92 in early 2026, retreated to the €70-78 range following statements from German and French leaders.
In mid-March, a ten-country coalition led by Italy, Poland, and Austria openly called for restructuring the EU ETS, arguing that surging energy prices and carbon costs have made industrial production unsustainable.
In early April, the European Commission updated the Market Stability Reserve, releasing additional allowances to stabilize prices.
The Commission described the move as a technical measure to shield the system from energy shocks, not a retreat from climate targets.
Supporting this stance, official data shows that emissions from the 10,000 facilities covered by the EU ETS have decreased by 50% since its inception, with a significant portion of this reduction occurring in the last two years.
However, this flexibility drew sharp criticism from Green Parties and environmentalists, who argued that easing industry burdens in this manner could endanger long-term climate goals.
German Green politician Michael Bloss described the decision as 'a bad April Fool’s joke,' warning that loosening the rules would punish pioneering companies that have already invested billions in the transition.
Ultimately, growing dissatisfaction with climate policies, intensified by the Iran-linked energy crisis and surging operational costs, has put both the 20-year-old EU ETS and the 2019 Green Deal vision to a severe test.
Compounded by stern warnings from Germany and France, this volatility has forced Europe to re-evaluate the balance between industrial survival and its climate mandates.
Caught between industrial survival and climate mandates, Europe has been forced to introduce unprecedented flexibility into its carbon market.
While Europe debates its carbon market, Türkiye officially entered the pilot phase of its national emissions trading system in early 2026.
This rollout executes the 2021 Green Deal Action Plan and aims to protect Customs Union exports from CBAM carbon taxes.
Turkish exporters, who send nearly half their shipments to the EU and US, now face uncertainty from both CBAM and the trade tariffs introduced by the Trump administration in early 2025.
The pressure is strongest in iron and steel, which accounts for 7% of total emissions, aluminum, and cement sectors.
Türkiye holds a competitive advantage, producing 70-75% of its steel through scrap recycling via electric arc furnaces, which has a much lower carbon footprint.
However, the high share of fossil fuels in the national power grid and gaps in data verification risk forcing exporters to pay higher rates based on EU default values.
Speaking to Anadolu, Etem Karakaya, a scholar in the economics of climate change from Eskisehir Osmangazi University, noted that the long-standing emission intensity requirements for EU firms may create a difficult competitive landscape for Turkish exporters.
He emphasized that Turkish exporters entering such a competitive environment for the first time will encounter a significant adjustment period and complex market dynamics.
Drawing attention to the iron and steel sector, Karakaya warned of the risks by saying, “My concern is that some of Turkish companies especially in the iron and steel sector, will face high border carbon costs in the EU market due to carbon-intensive production.”
Karakaya pointed out that Turkish energy-intensive industrialists and exporters have not faced serious emission reduction pressure until now.
He said that Turkish exporters, who have no experience in carbon pricing, will face a major test as they quickly confront CBAM.
He noted that Türkiye trying to establish its national ETS system during the carbon policy debates in the EU might seem like bad timing, but this should not disrupt Türkiye’s national ETS implementation plan.
Karakaya emphasized that the starting price is key, noting that market oversight must be handled with care.
Türkiye plans to distribute all emission allowances for free during the pilot phase.
However, this free model is only a stepping stone. Once the system fully kicks in and allowances transition to a paid model, these sales are expected to generate significant resources for green transformation.
Karakaya suggested that Türkiye could gradually transition from free to paid carbon allocations starting with non-traded sectors like power plants and reinvest the resulting revenue solely as grants for green transformation projects in industry.
He emphasized that Türkiye, which started the decarbonization process relatively late, delaying this process further could bring much greater costs in the future.
As host of COP31, Türkiye must back its climate commitment with concrete implementation; otherwise, it will undermine its leverage on the global stage, he said.
Karakaya predicts that the first EU ETS update in the summer months could involve significant concessions.
According to Karakaya, the economic problems and high energy costs experienced in Europe in recent years have been blamed on carbon prices.
While energy prices have soared due to the pandemic, the Russia-Ukraine war, Trump’s protectionist tariffs, and Middle East tensions, European politicians have branded carbon prices as the 'scapegoat.'
The European Commission’s 2025 Climate Action Progress Report reinforces this perspective, revealing that while the EU economy has expanded by 71% since 1990, total greenhouse gas emissions have dropped by 39%.
World Steel Association Chairman and Colakoglu Metalurji CEO Ugur Dalbeler highlighted Türkiye’s strategic advantage under the European Coal and Steel Community and Customs Union agreements, stressing the importance of defending these rights to prevent EU subsidies from creating unfair competition.
While warning against the risk of double carbon taxation at the border, Dalbeler noted that the EU might use green transformation as a protectionist tool amid its declining competitiveness.
He further pointed out that since Türkiye produces 75% of its steel through scrap-based electric arc furnaces, it possesses a significantly lower carbon footprint and the capacity to meet Europe’s needs with the lowest possible emissions.
Baris Balat, Co-founder and CEO of Erguvan, Türkiye’s first and only carbon credit trading platform, painted a more optimistic picture.
He noted that among iron, steel, and aluminum exporters virtually no one is left asking, 'What’s this all about?' regarding the transition to CBAM.
According to Balat, Turkish companies quickly put reporting discipline into effect during the transition period and clearly understood the risk.
Exporters are now making strategic plans to “hedge” these financial burdens, that is to create a financial protection shield against future price fluctuations.
Companies are taking financial measures today to avoid being harmed by price changes in carbon markets. The Turkish industrialist will be able to deduct the carbon fee paid within the scope of the national ETS from the CBAM obligation.
Balat emphasized that if the ETS mechanism did not exist, this cost would go directly to the European Union’s coffers.
For this reason, he defined the process not only as an adaptation issue but as a smart risk management strategy.
Balat noted that with the climate law passed in July 2025 and the rollout of the emissions trading system pilot in 2026, Türkiye has already charted its course.
He emphasized that this choice is not a matter of 'romantic climate idealism,' but the result of pure economic rationality.
Erguvan, which has been working in close cooperation with banks such as Garanti BBVA for four years, continues its preparations to establish Türkiye’s first Carbon Markets Fund together with its stakeholders.
Balat noted that the purpose of these initiatives is to fund decarbonization efforts and steer corporate capital toward domestic projects.
He summarized the process with the words “We are slowly in a hurry,” emphasizing that Türkiye is advancing with concrete steps in global climate finance as the host of COP31.
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