The Road to COP31: Türkiye’s Carbon Market and a New Investment Dimension

As COP31 approaches, with Türkiye preparing to welcome the global climate community to Antalya from 9–20 November 2026, attention is increasingly turning from climate ambition to implementation.

In this newsletter, we examine one of Türkiye’s most significant recent regulatory developments ahead of COP31: the introduction of the Türkiye Emissions Trading System and its wider implications for investors, lenders and carbon-intensive industries.

On 27 August 2026, Türkiye published the Regulation on Türkiye’s Emissions Trading System in Official Gazette No. 33353, establishing the framework for the country’s emerging carbon market. This represents more than a new environmental compliance regime. It introduces a market-based carbon-pricing mechanism that may influence corporate costs, capital expenditure, creditworthiness and asset valuations across Türkiye’s carbon-intensive industries.

“For investors, lenders and corporate finance professionals, the direction is increasingly clear: Carbon is becoming a financial variable.” – Sinan Arslaner, Country Partner Türkiye at SDG Impact Partners

From Emissions Reporting to Carbon Economics

The Regulation provides a framework for:

• Monitoring, reporting and verification of greenhouse gas emissions
• The operation of the Türkiye Emissions Trading System
• The allocation and surrender of emissions allowances
• The development of a market for trading emissions allowances

Once the system becomes operational, companies whose verified emissions exceed their available allowances may need to purchase additional allowances from the market. Companies that successfully reduce their emissions may, subject to the applicable rules, generate surplus allowances with potential economic value.

Consider a cement producer emitting one million tonnes of CO₂e annually but receiving 900,000 tonnes of free allowances. The company could be required to purchase allowances for the remaining 100,000 tonnes. The financial impact would depend on the prevailing carbon price and the company’s ability to reduce its future emissions.

This moves carbon from the sustainability report into the financial model.

Carbon Becomes a Valuation Variable

The introduction of a domestic carbon market means that emissions exposure can no longer be assessed solely as an ESG or compliance matter.

For carbon-intensive companies, the transmission mechanism may increasingly look like this: Carbon exposure → Operating costs → EBITDA → Cash flow → Debt-servicing capacity → Valuation

A company with apparently attractive margins may present a materially different investment profile once its expected carbon liabilities and transition expenditure are incorporated into the analysis. Over time, concepts such as carbon-adjusted EBITDA, carbon-adjusted cash flow and carbon-adjusted valuation may therefore become increasingly relevant, particularly in sectors with high emissions intensity, long-lived assets and significant exposure to European markets.

A New Due-Diligence Layer for Investors

For private equity, infrastructure, private credit and strategic investors, the Türkiye Emissions Trading System introduces an additional layer of financial and operational due diligence.

Investors may increasingly need to assess:

• Whether the target company falls within the scope of the TR ETS
• Its verified annual greenhouse gas emissions and carbon intensity
• The volume and duration of any free allowance allocation
• Its expected allowance deficit or surplus
• The sensitivity of EBITDA and cash flow to different carbon-price scenarios
• The capital expenditure required to reduce emissions
• The potential interaction with the EU Carbon Border Adjustment Mechanism
• The company’s ability to finance and execute its transition

These questions are particularly important for long-term infrastructure and industrial investments, where carbon costs and transition expenditure may accumulate over a 10–20-year investment horizon.

The question is no longer simply whether a company is profitable today. It is whether that profitability remains resilient in a carbon-priced economy.

CBAM and Export Competitiveness

The TR ETS must also be considered alongside the EU’s Carbon Border Adjustment Mechanism. For Turkish companies exporting carbon-intensive goods to the European Union, domestic carbon pricing and CBAM exposure may together influence production costs, margins and competitiveness.

The sectors initially covered by CBAM include:

• Cement
• Iron and steel
• Aluminium
• Fertilisers
• Hydrogen
• Electricity

For export-oriented businesses, carbon efficiency may therefore become an increasingly important component of corporate strategy and market positioning.

The relationship is straightforward: Lower carbon intensity → Lower carbon exposure → Stronger export competitiveness

Decarbonisation should consequently be viewed not only as a compliance cost, but also as an investment in the long-term value and resilience of Turkish industrial assets.

Where Investment Opportunities May Emerge

The development of the TR ETS is likely to create a broader investment ecosystem around industrial decarbonisation, carbon-market infrastructure and transition finance. The opportunity is not limited to trading emissions allowances. It may extend to the companies, technologies and financing structures required to support Türkiye’s transition towards a lower-carbon economy.

1. Decarbonisation and Transition Capital

One of the most immediate opportunities will be financing the capital expenditure required by energy-intensive industries to reduce their emissions. Cement, steel, aluminium, chemicals, ceramics, glass, paper and other energy-intensive industries may require substantial investment in:

• Energy efficiency
• Electrification
• Renewable energy integration
• Process optimisation
• Low-carbon production technologies
• Emissions-reduction infrastructure

The investment case may be particularly compelling where decarbonisation can simultaneously reduce energy costs, future carbon liabilities and exposure to CBAM.

2. Carbon-Intensive Companies with a Transition Gap

A second opportunity may emerge among companies with fundamentally viable businesses and strong underlying assets, but high carbon exposure and insufficient capital to finance their transition. For investors with operational, restructuring and sector expertise, temporary carbon-related pressure may create opportunities to acquire or finance these businesses at valuations that reflect their transition gap. The value-creation strategy would not rely simply on acquiring distressed assets. It would depend on financing and executing a credible decarbonisation pathway that improves margins, resilience and competitiveness.

3. Transition Finance and Private Credit

Companies affected by the TR ETS may need financing not only for conventional growth and working capital, but also for emissions-reduction investments. This creates opportunities for banks, private credit funds and other lenders to develop financing structures linked to:

• Emissions reductions
• Energy-efficiency improvements
• Carbon-intensity targets
• Transition milestones
• Sustainability performance

For lenders, carbon exposure should increasingly form part of credit analysis because carbon costs and transition expenditure may directly affect EBITDA, cash flow and debt-servicing capacity. Capital structures will need to reflect both the cost of transition and the financial value that a successful transition can create.

4. Carbon-Market Infrastructure

A functioning national carbon market will require reliable infrastructure beyond the industrial companies covered by the system.

Potential areas of opportunity include:

• Carbon accounting and MRV technologies
• Compliance-management software
• Market data and analytics
• Carbon-pricing intelligence
• Trading and brokerage platforms
• Verification and advisory services
• Digital infrastructure connecting market participants

As carbon becomes a tradable economic instrument, trusted data, credible verification and efficient market infrastructure will become increasingly valuable.

5. High-Integrity Carbon Projects

The interaction between domestic carbon projects, voluntary carbon markets and the mandatory ETS may also create opportunities, subject to future eligibility rules and regulatory limits. For investors, however, the key considerations will be quality, additionality, permanence, verification and regulatory eligibility, rather than simply the volume of credits generated. Credibility will be essential. Carbon projects that cannot demonstrate genuine and measurable emissions reductions are unlikely to create durable financial or environmental value.

6. Export-Oriented Industrial Assets

CBAM adds a further dimension to the investment thesis. Companies able to reduce the carbon intensity of products sold into the EU may strengthen their competitive position relative to higher-emitting producers. This could make transition investment particularly relevant for export-oriented industrial assets with established customer relationships and credible decarbonisation pathways. In these cases, lower carbon intensity may protect market access, improve margins and enhance long-term enterprise value.

Two Emerging Investment Theses

Türkiye’s developing carbon market may ultimately create two distinct but connected investment themes.

1. Carbon Risk

Investors can identify companies where future carbon costs, transition expenditure or CBAM exposure have been underestimated. This may reveal downside risks, mispriced liabilities or special-situations opportunities.

2. Carbon Transition

Investors can provide capital to companies capable of reducing their emissions exposure and creating value through operational improvement, lower future costs and stronger competitiveness.

The most compelling opportunities may lie at the intersection of the two:

Investing in carbon-intensive assets where a credible transition can create measurable financial value.

Looking Ahead to COP31

As Türkiye prepares to host COP31, the introduction of the TR ETS sends an important signal: climate policy is moving closer to the centre of the country’s economic and financial architecture. The significance of the system will ultimately depend on its implementation, including sectoral coverage, allowance allocation, carbon pricing, market liquidity and its relationship with CBAM.

Yet the direction of travel is already visible. Carbon is moving from disclosure to pricing, from compliance to capital allocation and from environmental policy into investment strategy. For private equity, infrastructure, private credit and special-situations investors, Türkiye’s emerging carbon market should therefore be understood not only as a new compliance environment, but also as a potential source of investment opportunities.

COP31 will place Türkiye at the centre of the global climate conversation. The development of its domestic carbon market provides an opportunity to demonstrate how regulatory ambition can be translated into industrial transition, financial innovation and investable pathways.

At SDG Impact Partners, our mission is to bridge the gap between impact ambition and investable capital, particularly across emerging and developing markets. We bring together regulatory insight, impact expertise and financial structuring to help investors, businesses and ecosystem partners translate transition needs into credible investment opportunities. The transition will require more than capital alone; it will require the right capital, intelligently structured and deployed at the right stage, to transform carbon risk into measurable impact and long-term value.

References

• UNFCCC: COP31 in Antalya, Türkiye, 9–20 November 2026
• European Commission: Carbon Border Adjustment Mechanism
• Türkiye Climate Change Presidency: Regulation on Türkiye’s Emissions Trading System, 27 August 2026
• Official Gazette of the Republic of Türkiye, No. 33353, 27 August 2026

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