Türkiye issues ETS pilot rules as the EU's ETS review reaches ministers

Türkiye's Directorate of Climate Change (DoCC) issued rules on 1 October for the pilot period of its national emissions trading system (TR-ETS), turning the pilot design set by the Carbon Market Board and announced on 3 September into operating requirements, according to the International Carbon Action Partnership (ICAP) in its report of 5 October and an earlier report. The pilot covers electricity generation, cement, iron and steel, aluminium and fertiliser. The Commission lists the sectors of the EU's Carbon Border Adjustment Mechanism (CBAM) as cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, so the pilot covers all but hydrogen. On 12 October, eleven days after the Turkish rules, EU environment ministers held a policy debate on the Commission's proposal to revise the EU ETS, according to the Council's meeting page.

What the Turkish pilot sets

ICAP's account is as follows. The pilot covers 2026 and 2027 emissions, with 2026 a reporting year only, and the first full implementation period runs from 2028 to 2035 in two sub-periods, 2028 to 2030 and 2031 to 2035. Free allocation is 100 per cent for 2027 emissions. Power plants receive plant-specific benchmarks, while for other sub-installations annual benchmarks through 2030 cannot exceed the average of the previous two years' values. Covered entities must surrender allowances for 2027 emissions by the last business day of November 2028, and verified activity level reports for 2026 are due by 30 April 2027, ICAP says.

Several points remain open. A supplementary allowance pricing mechanism, under which entities may make a voluntary payment to the government on top of the primary-market allowance cost, takes effect in 2027 for 2026 emissions, but the DoCC has not finished its methodology, according to ICAP's September and October reports. Whether offsets can be used in the pilot is undecided. Pilot allowances cannot be carried into the first implementation period, and an unmet 2027 obligation rolls into the 2028 obligation, the report adds.

What the EU proposes

The Commission's proposal, COM(2026) 616 of 17 July, is a directive amending Directive 2003/87/EC and Decision (EU) 2015/1814. It aligns the cap with the EU's 2040 target of a 90 per cent emissions cut and takes into account the possible purchase of 260 million international credits. That would lower the EU's domestic ambition to a cut of 85 per cent compared with 1990, a reduction of "up to 5 percentage points", the text says. International credits could be used starting in 2036, with a possible pilot in 2031 to 2035, and the 90 per cent trajectory applies if too few high-integrity credits are available.

The proposal also touches CBAM. It would reintroduce 15 per cent of the free allocation phased out because of the CBAM factor, starting in 2028, by "reducing and delaying the phase-out of free allocation until 2038 accordingly", to "reduce the speed at which CBAM is phased-in and mitigate the remaining carbon leakage risk". The Commission's guidance puts full CBAM implementation in 2034. From 2031, free allocation would be conditional: 80 per cent of each five-year amount allocated annually once a plan is submitted, and the remaining 20 per cent only after verification. A new Article 25b would let the EU support non-EU countries "in respect of emissions not already subject to surrender obligations". The text reviewed names no countries.

The ministers' debate covered the post-2030 emissions cap, international credits, permanent carbon removals, funding, free allocation and carbon leakage risk. No general approach was adopted, and the Irish presidency aims for agreement by December, the meeting page says. In paragraph 11 of their conclusions of 15 and 16 October, EU leaders reiterate the need to ensure a well-functioning carbon market and "to effectively protect against carbon leakage". The conclusions do not mention CBAM by name.

Where the two markets meet

Under Article 9 of Regulation (EU) 2023/956, an authorised CBAM declarant may claim "a reduction in the number of CBAM certificates to be surrendered" for a carbon price "effectively paid in the country of origin". The declarant must keep evidence of actual payment, certified by an independent person, and any rebate or other compensation available in that country is taken into account. Article 3 defines a carbon price as a tax, levy or fee, or allowances under a greenhouse gas trading system.

That rule meets a pilot in which free allocation is 100 per cent and 2026 carries a reporting obligation only. ICAP suggests the voluntary supplementary payment could help exporters show a higher effective carbon cost paid at home, but the methodology is unfinished, according to its September report. None of the sources reviewed says whether such a payment would qualify under Article 9, so the sector overlap does not by itself settle how much of a Turkish carbon price an EU importer can deduct. The timing is also close: the first full Turkish period starts in 2028, the year the Commission proposes to begin reintroducing free allocation.

• The DoCC's finished methodology for the supplementary allowance pricing mechanism, which takes effect in 2027 for 2026 emissions, per ICAP.
• The Carbon Market Board's decision on offsets, which ICAP says will come before the pilot's first compliance cycle.
• Council work on the ETS review, with the presidency aiming for agreement by December, according to the Council.