Optimal Design of Turkey’s Emission Trading System: Lessons From The EU and Global Best Practices

Date

2025-6-30

Author

Aşçı, Ahmet Atıl

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The paper aims to analyze the challenges and opportunities of establishing a Turkish Emissions Trading System (ETS) in light of the European Green Deal (EGD) and its Carbon Border Adjustment Mechanism (CBAM) by reviewing global ETS practices, particularly the EU ETS, to highlight potential shortcomings in the Turkish system. Türkiye’s Emissions Trading System (ETS) development, initiated in 2015 with its Monitoring, Reporting, and Verification (MRV) framework, faces critical design challenges that may undermine its effectiveness. The current inclusion threshold of 500 kt CO₂/year for Category C installations risks excluding significant emitters in key sectors—a limitation that could be addressed by adopting the EU ETS’s activity-specific criteria. Furthermore, while Türkiye’s proposed cap aligns with its 2023 Nationally Determined Contribution (NDC), independent analyses highlight its inadequacy for Paris Agreement compliance, projecting a 2030 emissions level (695 MtCO₂e) vastly exceeding a 1.5°C-compatible "fair share" (433.9 MtCO₂e). Without stringent adjustments, the TR ETS may generate a 17-million-unit allowance surplus by 2027, collapsing carbon prices and granting windfall profits to high emitters. However, strategically allocated ETS revenues (€2.1–2.5 billion annually at €10/allowance) could accelerate decarbonization through renewable energy investments, industrial efficiency programs, and just transition mechanisms—provided complementary policies address existing fossil fuel subsidies and ensure policy coherence. The analysis revealed the importance of a stringent, declining cap aligned with climate targets, contrasting Türkiye's current NDC projections with historical emission trends and 1.5-degree compatibility scenarios. Finally, we discuss the potential revenues from a Turkish ETS and suggest their strategic reinvestment for a sustainable economic transition.

Subject Keywords

European Green Deal, Carbon Border Adjustment Mechanism, Turkish Emission Trading System, Avrupa Yeşil Mutabakatı, Sınırda Karbon Düzenleme Mekanizması, Türkiye Emisyon Ticaret Sistemi

URI

https://dergipark.org.tr/tr/pub/metusd/issue/93165/1687380
https://hdl.handle.net/11511/115122

Collections

Department of Economics, Article