Turkey’s Ministry of Environment, Urbanization and Climate Change has outlined the structure of its upcoming Emission Trading System (TR ETS), releasing comprehensive details on 2024 monitoring, reporting and verification (MRV) results as well as the benchmark methodology that will guide free allocation. The new framework places particular emphasis on the iron and steel industry, one of the core sectors of the pilot phase and a major source of verified emissions.
MRV data and steel sector share
According to the ministry’s national MRV report, installations are grouped into three categories by annual emissions. Category a includes 408 facilities reporting 5.45 million mt of carbon dioxide, category b covers 249 facilities with 20.7 million mt of carbon dioxide, while category c consists of 133 facilities that reported 249.8 million mt of carbon dioxide. Within this national structure, the iron and steel industry accounts for 107 installations and a combined 33.3 million mt of carbon dioxide-equivalent emissions. This represents roughly 12 percent of Turkey’s verified emissions, underscoring the industry’s central role in the emerging carbon market.
Structure of TR ETS: pilot phase and implementation phase
The TR ETS has been designed in two distinct stages. A pilot phase will run between 2026 and 2027, covering installations that emit more than 50,000 mt of carbon dioxide-equivalent annually. The pilot includes electricity generation, cement, iron and steel, aluminum, fertilizers, ceramics, chemicals and refining, sectors that together represent approximately 245 million mt of carbon dioxide-equivalent and are already regulated under the EU Carbon Border Adjustment Mechanism (CBAM). Following the pilot, the TR ETS will enter its full implementation phase between 2028 and 2035. This phase introduces full compliance obligations, annual reporting cycles and benchmark-based free allocation.
Benchmarking and free allocation methodology
Turkey’s system uses a benchmark-based approach to determine the number of free allowances given to each installation. Benchmarks compare the emissions intensity of facilities producing the same product, defining the baseline amount of emissions linked to one unit of output. Facilities operating below the benchmark are more efficient, while those above the benchmark show higher intensity.
The final allocation is determined by combining four parameters: the benchmark value for the product, the facility’s activity level, the sectoral activity factor linked to carbon leakage risk and the free allocation rate. These parameters together establish the number of free allowances issued each year. The calculation is performed by multiplying the benchmark value by the activity level, the sectoral activity factor and the free allocation rate. This structure closely mirrors international ETS systems, ensuring that free allocation reflects performance, leakage risk and output.
Benchmarked sub-installations in iron and steel industry
The report provides extensive technical definitions for benchmarked sub-installations in Turkey’s steel sector, mapped to relevant PRODCOM codes. These include coke production, where coking coal and carbon-rich feedstocks define the material boundary; sintered iron ore, which incorporates iron ore fines, limestone, dolomite and carbonaceous fuels; and liquid metal production, which includes scrap, blast-furnace hot metal, direct-reduced iron, fluxes and coal-based reductants.
For electric arc furnace operations, the TR ETS distinguishes between carbon steel and high-alloy steel. High-alloy EAF steel is defined either by the presence of at least eight percent metallic alloying elements or by meeting specific metallurgical performance criteria. Production in this category uses ferroalloys such as ferrochromium or ferronickel to enhance corrosion resistance, mechanical strength and other performance qualities. The list of benchmarked sub-installations also covers a wide variety of cast iron and cast steel products used in automotive, mechanical and industrial applications.