Türkiye's First Climate Law Enacted: Critical Changes for Chemical Industry

Türkiye's first comprehensive climate legislation, the Climate Law, has been approved by parliament. This new regulation introduces fundamental changes in greenhouse gas emission reduction and climate change adaptation.

Core Objective of the Law

The Climate Law establishes the legal and institutional framework covering greenhouse gas emission reduction and climate change adaptation activities, including related planning and implementation tools, revenues, permits, and oversight.

Emissions Trading System (ETS) - Carbon Credits

One of the most significant innovations of the law is the establishment of an Emissions Trading System (ETS) based on the principle of setting upper limits on greenhouse gas emissions. This system will:

• Encourage greenhouse gas emission reduction through the buying and selling of allowances

• Include national and international market-based mechanisms

• Be organized through primary and secondary markets

Carbon Market Board Established

The Carbon Market Board, to be established under the leadership of the Minister of Environment, Urban Planning and Climate Change, will be responsible for the operation of the ETS. The Board will have decision-making authority on critical issues such as the distribution of allowances under the ETS, the amount of allowances to be put up for sale, free allowance decisions, offset ratios, and strategies for the international carbon market.

Industry Impact: Incentives and Penalties

The law provides comprehensive incentive mechanisms to support green transformation and climate-friendly investments. Both public and private sectors will be able to benefit from financial support for projects with greenhouse gas reduction and climate change adaptation potential. Revenues from relevant institutions may also be used to promote green capital instruments, develop insurance instruments, and reduce investment risks.

Additionally, according to the new regulation, companies that fail to fulfill their obligations may face significant administrative fines. Penalties vary according to the category of non-compliance and can range from 120,000 TL to 2.5 million TL.

Pilot Implementation and Transition Period

A pilot period is envisioned before the ETS implementation begins. During this period, penalties imposed on companies that fail to fulfill their obligations will be applied with an 80% discount. Within three years of the law's entry into force, companies within the ETS scope will be required to obtain greenhouse gas emission permits. When necessary, this period may be extended by up to two years.

Implications for the Chemical Sector

The Climate Law represents a watershed moment for Türkiye's chemical industry, which is traditionally energy-intensive and carbon-heavy. Chemical companies will need to:

• Prepare for mandatory emission monitoring and reporting

• Develop strategies for carbon allowance management

• Invest in cleaner technologies to reduce compliance costs

• Consider carbon pricing in their long-term business planning

The three-year transition period provides crucial time for the chemical sector to adapt to the new regulatory environment while the pilot phase offers an opportunity to test systems with reduced penalties.