Türkiye's accession to the Paris Agreement in 2021 has transformed the fight against climate change from an environmental obligation into an important part of a macroeconomic transformation. The goal of limiting global temperature increase to 1.5 degrees Celsius (2.7 degrees Fahrenheit) is a policy area for Türkiye with direct influence on its production structure, trade balance and public finances.
Global trade tensions, the Russia-Ukraine conflict and deepening policy uncertainties with geopolitical and regional risks stand out as interconnected dynamics that are increasing volatility in the global economy. Meanwhile, issues of access to and pricing of energy resources, as well as the economic and environmental impacts of climate change, come to the table. In this risky environment, climate policies are not only an environmental issue but a significant component of sustainable development, energy security and development policies.
In Türkiye, the economic framework of climate policies has been gradually built through development plans. Türkiye has adopted an approach of balancing global responsibilities with economic growth targets. The fact that climate-related issues are emphasized 72 times, green transformation 68 times and circular economy 20 times in the 12th Development Plan implies that climate change has been placed in a strategic position in Türkiye's medium and long-term development strategy.
Türkiye's main objective is sustainable development via transitioning to a resilient, low-carbon and inclusive economic growth against the negative impacts of climate change. This framework requires new approaches for research and development (R&D) and circular economic activities. One of the fundamental steps of the energy transformation is to increase the share of renewable sources in electricity production from the current level of 40% to 50%. To illustrate, increasing the current zero battery storage capacity to 5,000 MW and waste management operations are good examples in this direction. As a result, the increase in the growing share of renewables in the installed electricity capacity suggests that Türkiye is unlikely to face major challenges in aligning its energy sector with climate policies. However, technological adaptation and sustainable financing mechanisms are critical, too.
In the financing side, emission reduction targets are also being addressed from a sector-specific cost-benefit perspective. This requires action in sectors such as energy, industry, transportation, construction and agriculture. The most important external factor highlighting the economic dimension of climate policies has been the European Union's Carbon Border Adjustment Mechanism (CBAM) and the Green Deal approach. The CBAM can create cost pressure, particularly for carbon-intensive sectors. Türkiye’s real sector is aware of these developments. According to central bank analyses, metals, automotive and white goods supply industries, machinery and textiles are the sectors most closely monitoring developments related to the CBAM. In the primary metals sector, there are some exporters with a potential competitive advantage under the CBAM because of relatively lower carbon intensity compared to peers in competing countries. However, some firms are cautious due to the possible changes in the EU’s quota regime and risks associated with scrap supply. CBAM may create additional costs.
Global cooperation is also crucial in addressing climate-related problems. These problems encompass multifaceted approaches from the transformation of energy systems to taxation. In this regard, Türkiye will play an active role in global climate governance. Türkiye, as the host of the COP Conference in 2026 for the first time after intense negotiations, will host leaders, bureaucrats, development banks and private sector representatives from nearly 200 countries. The meeting will comprehensively address climate economics, including financing, investment standards, carbon market regulations and the macroeconomic impacts of the green transition.
The plan to hold the main event in Antalya and the leaders' summit in Istanbul supports Türkiye's ambition to become a regional hub for climate and sustainable finance. The activation of the emissions trading system before the summit is also critical and sends a signal for Türkiye’s global position. Türkiye's hosting and presidency of the COP31 in 2026 is both a diplomatic success and a strong reflection of its will to be among the countries shaping economic governance in the green transition process. On the other hand, Australia's active role in the conference emphasizes Türk-Anzac friendship, underlining that climate diplomacy can be built not only on technical goals but also on historical consensus and a shared development perspective.
COP31 represents a window of opportunity, both diplomatically and financially. For Türkiye, it can serve as a significant leverage in the areas of green finance, sustainable investment and carbon markets. The direction of global climate finance, measured in trillions of dollars, is being shaped by emission trading systems, carbon pricing, green bonds and sustainable infrastructure investments within the COP processes. Türkiye's COP31 presidency will enable it to play a decisive role in directing these financial flows in a more inclusive way for developing countries.
Rising geopolitical risks in the global economy and the accelerating transition to a multipolar world order are making energy supply security and price stability more fragile. In this uncertain environment, combined with climate change, multi-sided policies are gaining importance.
In this context, the emissions trading system will serve as a critical leverage for investments. It is important for sectoral support that the emission trading-based tax system be structured according to emission intensity, comprehensively covering electric, hybrid, and other alternative fuel vehicle groups. Increasing R&D and innovation capacity stands out as a fundamental priority for the sustainability of the green transformation. R&D support for low-carbon production technologies, energy efficiency solutions, battery systems, hydrogen technologies and circular economy applications will strengthen the position of the manufacturing industry in global value chains. Green technologies integrated with digitalization will make emission reduction cost-effective while increasing efficiency.
In line with the 2053 Net Zero Emissions Target, updating the Long-Term Climate Change Strategy, which includes interim targets, and the Second Nationally Determined Contribution Statement, which covers greenhouse gas reduction and adaptation commitments, will strengthen the alignment of climate policies with economic programs. If this process is managed correctly, it will be possible to achieve an investment-driven transformation through emission reduction without creating unexpected costs on growth.
