Turkey's carbon-market ambitions are built on shaky ground

COP31 in Antalya is meant to be a moment when carbon markets ascend to the centre of global climate diplomacy. Turkey, the conference's host, wants them to take what it calls their "rightful place". The claim is ambitious. The timing is deliberate. And the incentives behind it deserve close scrutiny.

Turkey's bid for carbon-market prominence is not accidental. President Erdoğan has long sought international legitimacy through grand diplomatic events. After backing down against the United Kingdom over COP26 in Glasgow, Turkey refused to withdraw its bid this time and won. The result is an unprecedented arrangement: Turkey hosts the November summit in Antalya while Australia, the runner-up, shares the presidency as "negotiations president". It is a face-saving compromise that reflects Germany's unwillingness to host again in Bonn, Australia's exhaustion, and Mr Erdoğan's stubbornness. But hosting is only the means. The substance of Turkey's pitch - carbon markets - is a different story.

The incentive is straightforward. On July 2nd 2025 Turkey's parliament passed its first comprehensive climate law, creating the legal basis for a national emissions trading system. The pilot phase launches this year, running through 2027, before full implementation from 2027 to 2034. Turkey's system will cover roughly 770 installations - power plants and industrial facilities emitting above 50,000 tonnes of CO₂ equivalent - and will leverage a mandatory monitoring and reporting system that has existed since 2015. At the same time, the country needs a mechanism for generating and trading international carbon credits under Article 6 of the Paris Agreement, the provision that allows countries to swap mitigation outcomes to meet their climate pledges. A COP that legitimises carbon markets helps Turkey's domestic ETS gain credibility and positions the country as an exporter of emission-reduction credits to richer nations. Carbon markets are not merely a climate tool for Turkey. They are an instrument of geopolitics and industrial policy.

The trouble is that Turkey's own carbon market leaves much to be desired. Carbon Market Watch, a research group, published a scathing assessment in May this year. The Turkish ETS relies on generous free allowances for polluting industries, with only a 2.5% phase-down in the first year and full auctioning not arriving until 2034. The system uses intensity-based caps rather than absolute emissions limits, meaning overall pollution need not fall. There is little transparency and no guarantee of absolute reductions. The ETS was designed, the report argues, to shield Turkey's heavy industry from the EU's Carbon Border Adjustment Mechanism, which imposes tariffs on carbon-intensive imports from January 2026. In short, Turkey's carbon market looks more like a compliance instrument for exporters than a serious mechanism for decarbonisation.

That distinction matters when Turkey asks the world to take carbon markets seriously. The system it is launching is weaker than the EU Emissions Trading System, China's national scheme, and even some emerging-market systems. It is not hard to see why. The government faces pressure from domestic industry, political considerations around employment, and a desire to avoid the costs of a genuine price signal. The result is familiar: a system that preserves incumbent advantage while giving the appearance of reform.

But Turkey's ambitions extend beyond its borders. Article 6 of the Paris Agreement has been gaining traction. As of June this year, 112 bilateral carbon-credit agreements have been signed between countries, up from fewer than a decade ago when the mechanism barely existed. Over 120 designated national authorities have been established to manage the flow of credits. The voluntary carbon market, by contrast, has stumbled. Credit retirements fell by 7% in 2025 to 157 million tonnes, according to Carbon Direct, a market analyst, despite a 227% surge in corporate climate commitments. The gap between rhetoric and action is widening.

This is the tension Turkey wants COP31 to resolve, or at least advance. The Turkish presidency has identified nine priority areas for the summit, including electrification, resource efficiency, energy security, renewable energy and nature-based solutions. COP31 President Murat Kurum told a ministerial gathering in Copenhagen in May that the share of final energy consumption met by electricity - currently around 20% globally - should rise "as much as we possibly can". The International Renewable Energy Agency, an intergovernmental organisation, wants it to reach 35% by 2035. Carbon markets are not explicitly central to this electrification agenda, but they are the financial infrastructure that could make it more affordable.

To be sure, carbon markets have real promise. MSCI, a ratings firm, projects that Article 6 could account for 50% of global carbon-credit demand by 2040. When countries face steep abatement costs, trading allows reductions to happen where they are cheapest. The mechanism can channel finance to developing nations, where many of the lowest-cost emission cuts exist. And the compliance demand from schemes like CORSIA, the carbon-offsetting programme for international aviation, is structurally real: all countries must participate from 2027, and airlines will need credible credits to meet it.

Yet the promise is not yet reality. The voluntary market has been flatlining for five years. Poor-quality credits - from forest-protection projects that would not have been threatened in the first place, or cookstove programmes whose emission savings have been overstated - have undermined confidence. High-quality carbon-dioxide removal credits accounted for only 5% of voluntary retirements in 2025, and less than 10% of CDR projects meet rigorous quality standards, according to Carbon Direct's own criteria. The compliance market under Article 6 is growing, but slowly. The UNFCCC subsidiary bodies meeting in Bonn in June carried unresolved tensions into the pre-COP31 period, and the Article 6 rulebook is due for renegotiation in 2028. Developing countries remain nervous about the risk that international credit transfers will hollow out their domestic emission-reduction efforts.

Turkey's position as a bridge between the developed world and the Global South gives it credibility to address these tensions. The country sits outside the Annex I group of wealthy nations under the UN Framework Convention on Climate Change but shares more in common with the EU than with most emerging economies. It is an EU accession candidate, a NATO member, and a trading partner with both the Global North and South. In principle, it could mediate the deadlock between wealthy nations seeking cheap offsets and developing countries wary of becoming carbon-credit suppliers without meaningful domestic benefit.

In practice, Turkey's credibility is undermined by the design of its own system. A country that hands out free allowances to its polluters and lacks a transparency framework is in an awkward position to champion high-integrity global standards. The hypocrisy is not fatal, but it is noticeable. Other countries will be watching whether Turkey's COP31 presidency produces genuine rules for quality, additionality, and accounting, or whether it prioritises its own commercial interest in selling credits.

The broader lesson is institutional. Carbon markets are not inherently good or bad. They are a mechanism whose quality depends on the rules that govern them, the transparency with which they operate, and the political will to enforce them. A well-designed carbon market raises the cost of pollution, channels finance to low-cost abatement, and creates a price signal that rewards innovation. A poorly designed one subsidises incumbents, rewards greenwashing, and entrenches the very emissions it claims to control. The difference is not technical. It is political.

For COP31 to deliver on Turkey's promise, three things would need to happen. First, the summit would need to strengthen the integrity requirements for Article 6 credits, ensuring that corresponding adjustments - the accounting measure preventing double-counting - are applied consistently and that host countries demonstrate genuine additionality. Second, it would need to address the quality crisis in the voluntary market, where most credits still come from low-integrity projects. Third, Turkey itself would need to demonstrate that its own ETS is capable of driving real emission reductions, not just compliance theatre.

None of these outcomes is guaranteed. The Bonn negotiations earlier this year produced little progress on the harder questions. The Article 6 rulebook renegotiation in 2028 will be an even more consequential test, and Turkey's ETS pilot has not yet proved its mettle. The voluntary market remains stuck in a cycle of oversupply and distrust.

The ambition is real, if overstated. Carbon markets do have a role in the architecture of global climate action. But their "rightful place" is not the one Turkey imagines - a centre-stage position built on diplomatic leverage and commercial opportunity. It is one earned through rules that are transparent, standards that are rigorous, and systems that actually reduce emissions rather than papering over them. Turkey can still deliver on the substance behind its rhetoric. The summit in November will show whether it intends to.