In general you can say "no, thank you" or "I'd rather not" or "I prefer not to".
But here are some possible answers, depending on what they say.
Friend: Turn on your webcam!
You: No, thank you. Let's keep chatting like this instead.
Friend: Do you have a webcam?
You: I do, but I prefer not to use it. Thank you for understanding.
Friend: Will you turn on your webcam?
You: I'd rather not. Thanks for your understanding.
Friend: Why don't you turn on your webcam?
You: I would prefer not to. Let's keep talking like this instead.
Friend: Are you going to use your webcam?
You: Maybe some other time. We'll see. (this keeps the option open for the future)
Friend: Hey, we can share our images with the webcam. Do you want to?
You: Thanks for that offer. I don't want to right now. Let's talk instead.