China in new push for national emissions trading scheme

The Chinese government has released a new consultation plan for a long-delayed national emissions trading scheme (ETS), after president Xi Jinping's pledge to achieve carbon neutrality by 2060 added new urgency to the country's emissions reduction plans.

China already operates emissions trading programmes on a pilot basis in several cities. But moves towards a nationwide scheme have stalled for several years.

The plan was released by the ecology and environment ministry, which took over responsibility for establishing the national ETS from top economic planning body the NDRC in 2018. The ministry is also be responsible for regulating carbon emissions in China.

The consultation plan sets a cut-off point of 26,000 t/yr of CO2 equivalent (CO2e) emissions, above which entities should be included in the ETS. This level is equivalent to consumption of 10,000 t/yr of standards coal equivalent, it said.

This indicates the planned ETS would cover a broader range of entities than in the pilot scheme that began in 2013 and will potentially raise emissions costs for industrial operations such as coal-fired power plants, steel mills and refineries.

China's pilot carbon market covers more than 3,000 entities in over 20 industrial sectors, including steel, power generation and cement. Total trading volumes were 400mn t of CO2e of as of August, state media said.

Under the new plan, entities will be able to use China certified emissions reduction (CCER) projects to offset as much as 5pc of emissions by volume. A single CCER unit will be able to offset 1t of CO2e, which could come from sources such as renewable projects, carbon sinks and methane recovery.

Participating entities will get free emission quotas "at the first stage" of the ETS, and then buy and sell more quotas in the market as needed when the initial quotas have been used. Entities will face fines or other penalties if they default or engage in fraud when declaring emissions volumes, although the size of the proposed fines is relatively low at 10,000-30,000 yuan ($1,500-4,500).

There is still no timescale for the ETS, although the ministry said it is accelerating its plans for the launch. Xi's carbon neutrality pledge, made in September, has focused attention on how China will reduce its world-leading carbon emissions after a planned peak before 2030.